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Overview of Results for Fiscal 2018
In fiscal 2018, the Japanese economy continued to see
moderate recovery in consumer spending as employment
and income conditions improved. With growth in capital
expenditures in the corporate sector as well, the economy
itself remained on a gradual recovery track. However, someweakness in industrial production and other soft spots
emerged in the economy heading into the fourth quarter.
In the U.S., the steady economic recovery continued asconsumer spending and capital expenditures increased. InEurope, the modest economic recovery continued on theback of strong employment conditions, but also exhibitedsome stalling with Germany’s GDP growth trending flat. InChina, economic growth decelerated as exports declined,
but government stimulus measures are expected to provide support going forward.
Under these economic circumstances, the Daido SteelGroup’s key client industries such as automobiles and industrial equipment generally did well. Accordingly, steel sales
volumes increased year on year. However, demand declined
in some areas such as semiconductors. As for raw materials
and auxiliary materials, scrap steel prices generally increased
year on year due to robust domestic demand. Also, sharp
growth in prices for auxiliary materials including graphite electrodes used in steelmaking resulted in higher costs.

As a result, the Daido Steel Group’s net sales in fiscal
2018 increased by ¥38,036 million year on year to¥543,255 million, due to a rise in sales prices reflecting
higher prices for raw materials and auxiliary materials, aswell as growth in sales volumes. Ordinary income declinedby ¥1,787 million to ¥34,343 million, owing to impact fromhigher costs associated with a sharp rise in auxiliary material prices. Net income attributable to owners of the parent
decreased by ¥2,738 million to ¥21,182 million.

Outlook for Fiscal 2019
In fiscal 2019, the global economy is likely to lose somesteam and growth to slow. In the U.S., modest growth
should continue on the back of robust employment conditions, though slight deceleration is likely as tax cut benefits
fade. The Chinese economy is slowing due partially to
trade friction with the U.S., and while support from government stimulus measures is expected to keep the slowdown
modest, excessive debt and other risks exist. The Japanese
economy is also likely to decelerate, owing to weaker
external demand. Against this economic backdrop, in thekey U.S. and China markets we anticipate a slight decline
in demand for automobiles, a major source of demand.
Also, we expect recovery to take time for the semiconductors field, which is seeing sharp deceleration.

SPECIALTY STEELIn structural steel, we project slightly lower global demand for automobiles, a major source of demand for this steel. In tool steel, weanticipate similar demand trends. As for costs, we expect prices toremain high for energy and auxiliary materials, such as graphite electrodes used for manufacturing, and will work to reduce costs to maintain sustainable margins. Further, we will pursue market penetration of
the newly applied surcharge system reflecting fluctuations in prices for
raw material alloys in tool steel.

HIGH PERFORMANCE MATERIALS AND MAGNETIC
MATERIALS
We expect high performance products like stainless steel, high alloys
and powder metal to see ongoing growth in sales volumes in theautomobile industry over the medium term, assuming improvementsin the fuel economy of internal combustion engines for automobiles
increase usage. To prepare for this medium-term growth, we areworking on bolstering manufacturing facilities. In magnetic products,
we are concentrating on the increasing use of electronics in automobiles and electrical applications and working hard to reduce costs.

PARTS FOR AUTOMOBILE AND INDUSTRIAL EQUIPMENT
In free forgings, we are focusing on keeping up with ongoing brisk
demand for civil aircraft. In turbo-related products, we will strive togrow by tapping into expanding demand from an increasing ratio ofgasoline engines with turbos installed over the medium to long term.
In engine valves, we are continuing to work towards cost improvement
and mass production of hollow-head valves that contribute to improving the fuel consumption of automobiles.

ENGINEERING
We will keep working to expand sales of Premium STC® (Short TimeCycle)—our mainstay STC® annealing furnace with a new combustion
system installed, vacuum carburizing furnaces for auto parts makers, androtary electric furnaces that lead to more energy-efficient steelmaking.

TRADING AND SERVICE
In the trading and service segment, demand should be at the samelevel as in 2018.

Based on the above, for fiscal 2019, the Daido SteelGroup forecasts consolidated net sales of ¥530.0 billion,
operating income of ¥31.0 billion, ordinary income of ¥31.5billion, and net income attributable to owners of the parentof ¥24.0 billion.

Medium- to Long-Term Management Strategy
Initiatives to realize a sustainable society are a key global
theme. Even among our customers, reducing emissions
that contribute to global warming is a major topic, and highlevels of efficiency for the internal combustion engines ofautomobiles and jet engines of aircraft are required. In theautomobile industry moreover, the kind of major technological innovation only seen once every 100 years is aboutto occur, such as the diversification of power trains to proliferate the use of electronics and similar devices and theexpanding use of automated cars and connected cars.
Furthermore, the digital revolution marches onward,
capitalizing on big data, AI (artificial intelligence) and IoT(Internet of Things), and ushering in transformations in awide variety of industries. As a result, the Daido SteelGroup expects that demand for semiconductors will
increase and the automation of various processes andsuchlike by robots will develop further.
In this business environment, we formulated our
medium-term business plan (Daido Steel Group 2020
Mid-Term Management Plan), a three-year plan throughfiscal 2020 (the fiscal year ending March 31, 2021). We
also set our basic management policy as “Beyond theSpecial: We support our customers’ technological innovations by supplying high performance materials.” We will
put that policy into practice. For instance, we will supply
high alloys and stainless steel that are highly resistant toheat and corrosion for higher efficiency jet engines andinternal combustion engines in automobiles, high performance powder products and high performance magnets
for the increasing use of electronics in automobiles, andsoft magnetic materials for the expanding use of automated cars. We will also deliver products for the digital
revolution, such as super-clean stainless steel needed forsemiconductor manufacturing equipment and high performance magnets required for increasing use of automation
and robots. By supplying the high performance materials
that our customers need, we will firmly support theirevolutionary and technological innovations.

MESSAGE FROM MANAGEMENT

We need to keep a close eye on uncertainties that canhave an impact on the global economy, including the U.S.’sprotectionist policies and the U.K.’s exit from the European
Union. In addition, the Daido Steel Group recognizes theongoing need to monitor risks that could have an impacton the Group, such as the risk of weaker demand due toforeign exchange fluctuations and the risk of price fluctuations in raw materials and fuel.
Given these conditions, our segment forecasts for thecoming fiscal year are as follows.

June 2019

Takeshi Ishiguro
President

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