REVIEW OF OPERATIONSSPECIALTY STEEL
Overview of BusinessResults of Operations

Specialty steel, the Company’s core business, generates

Sales volume for structural steel increased year on year as

approximately 38% of consolidated net sales. Specialty steel is

automobile-related demand was brisk and demand for industrial

made by combining steel with alloys to add value in the form ofmachinery was robust. Sales volume for tool steel also rose year

properties such as resistance to heat, abrasions or rust.

on year, driven by strong momentum in the automobile field.

Because a range of special properties can be achieved by vary-The cost of steel scrap, the main raw material, was generally

ing the types and amount of alloy, one of the special features ofhigher year on year due to strong domestic demand. A sharp

the business is that products are developed to meet the specificrise in prices for auxiliary materials such as graphite electrodes

applications required by users. The automobile and industrial

used in steelmaking also led to higher costs. Sales prices

machinery sectors are the primary users of specialty steel,increased year on year, reflecting the rise in raw material andaccounting for about 80% of sales in this business segment.

auxiliary material prices.
As a result, the specialty steel segment’s net sales in fiscal
2018 increased 9.9% year on year to ¥207,744 million, due
primarily to higher sales volume and an increase in sales prices

R E V I E W O F O P E R AT I O N S

reflecting higher raw material and auxiliary material prices.
­Operating income decreased by ¥479 million to ¥5,998 million,owing to the impact of higher costs associated with a steep
increase in auxiliary material prices.

Tool steel from Daido Steel06

HIGH PERFORMANCE MATERIALS AND MAGNETIC MATERIALS
Overview of BusinessResults of Operations

This segment, which accounts for roughly 34% of consolidated

Sales volumes of stainless steel products and high alloys

net sales, manufactures and sells high performance materials

increased year on year, driven by brisker demand amid theand magnetic materials used chiefly in automobiles, computers,

movement to make automobiles more fuel efficient. However,mobile phones and consumer electronics.

semiconductor-related products were affected by capital expen-Key products include stainless steel products, rare earth

ditures being delayed worldwide and magnetic products bymagnets, high alloys, titanium products, and high performancelower automobile sales in China, such that both saw a decline inpowder metal products.

sales volume along with inventory adjustments. Net sales ofpowder metal products increased, due to an increase in sales
prices reflecting higher raw material prices.
As a result, net sales for the high performance materials andmagnetic materials segment in fiscal 2018 increased 8.1% yearon year to ¥184,554 million, reflecting higher sales volumes forhigher sales prices. Operating income decreased ¥1,501 million
to ¥20,694 million, owing mainly to lower sales volumes for­semiconductor-related stainless steel and magnetic products.

R E V I E W O F O P E R AT I O N S

stainless steel and high alloys used in automobiles, along withNEOQUENCH-DR (Nd-Fe-B ring magnets) for EPS motors

07PARTS FOR AUTOMOBILE AND INDUSTRIAL EQUIPMENT
Overview of BusinessResults of Operations

This segment contributes around 20% of consolidated net

Net sales of free forged products increased year on year assales. It manufactures die forged parts such as crankshafts

strong aircraft-related demand outweighed a decline inusing specialty steel, precision cast parts for use in turbo-semiconductor-related demand in the fourth quarter. Net sales

chargers, as well as engine valves, jet engine shafts and partsof die forged products and engine valves rose year on year,for gas turbines. Most of the auto parts sold in this segment use

reflecting brisk automobile production. Net sales of precisionmaterials that were developed through joint projects with auto-cast products increased year on year, owing to ongoing growthmakers to meet their exacting requirements. These parts canin demand for turbine housing. However, turbine wheels

therefore lower processing expenses at customers’ factories asexperienced inventory adjustments, due mainly to a decline inwell as contribute to reducing the weight of finished products.

automobile sales in China.

R E V I E W O F O P E R AT I O N S

In this segment, Daido Steel has a high market share in
numerous product categories, including aircraft jet engine

industrial equipment segment for fiscal 2018 increased 3.4%

shafts, automobile engine valves and turbine wheels. We will

year on year to ¥109,929 million, chiefly on a contribution fromcontinue to develop and launch new products that differentiate

sales volume growth. Operating income decreased by ¥761

us from competitors and support our position as a provider ofmillion to ¥2,309 million, as a sharp rise in auxiliary material

advanced parts

prices pushed up costs.

In addition to specialty steel supplied by the specialty steel
segment of the Group, some materials used in this segment aremanufactured in-house.

Jet engine shaft

08

As a result, net sales in the parts for automobile andENGINEERING
Overview of BusinessResults of Operations

This segment generates about 5% of consolidated net sales.

Net sales in the engineering segment for fiscal 2018 increased

Major activities include the design and manufacture of, and10.7% year on year to ¥27,529 million, as companies’ capital

related after-sales services for, melting and refining equipment

expenditures were strong, and operating income rose ¥455

such as arc furnaces and ladle furnaces (LF), heat treatment

million to ¥2,292 million.

furnaces for auto parts such as vacuum carburizing furnaces
and STC® (Short Time Cycle) annealing furnaces, and environmental equipment such as sewage sludge carbonization furnaces and automobile tunnel filters, as well as machine tools.
With respect to heat treatment furnaces for auto parts inparticular, the operation and engineering technologies we havefostered over the years support our cutting-edge engineeringbusiness worldwide, in which we constantly maintain a grasp oftechnologies that this segment has created contribute toimprovements in quality for customers and energy reduction ina wide variety of settings.
Daido Arc Process (DAP)R E V I E W O F O P E R AT I O N S

current market needs. The many new types of equipment andTRADING AND SERVICE
Overview of BusinessResults of Operations

The major activities of this segment, which accounts for approx-Net sales in the trading and service segment for fiscal 2018

imately 2% of consolidated net sales, include the sale of prod-declined 4.8% year on year to ¥13,499 million, while operatingucts made by Group companies, employee benefits services,income decreased by ¥158 million to ¥2,527 million. These

real estate and insurance services, golf course management,

decreases partly reflected lower sales at the China trading

analytics, and sales of software to external customers.

­subsidiary from a slowdown in domestic demand in China.

09