Consolidated Financial Results for the Nine Months Ended December 31, 2020
(Japanese Accounting Standards)
February 9, 2021
Name of Listed Company: Mitsubishi Materials Corporation
Listing:
Tokyo Stock Exchange
Stock Code:
5711
URL:
https://www.mmc.co.jp/
Representative: Naoki Ono, Chief Executive Officer
Contact:
Yuji Omura, General Manager, Corporate Communications Dept.
Tel: +81-3-5252-5206
Scheduled filing date of Quarterly Report:
February 9, 2021
Scheduled date of start of dividend payment:–
Supplementary materials for the quarterly financial results: Yes
Investor conference for the quarterly financial results:
Yes (For Institutional Investors)(Amounts of less than million yen are omitted.)

1. Results of the nine months ended December 31, 2020 (From April 1, 2020 to December 31, 2020)(1) Consolidated Results of Operations (cumulative)(Figures in percentages denote the year-on-year change.)
Operating profit(loss)Net sales

The nine months ended December 31,
2020
The nine months ended December 31,
2019(Note) Comprehensive income:

Profit (loss)
attributable toowners of parent

Ordinary profit(loss)

Million yen%

Million yen%

Millionyen%

Million yen%

1,079,885-4.0

15,595-34.9

32,019-18.8

11,012

9.5

1,124,608-11.6

23,937-30.1

39,426-6.3

10,058-21.6

The nine months ended December 31, 2020: 20,452 million yen (33.5%)
The nine months ended December 31, 2019: 15,326 million yen (–%)

Profit (loss)
per share

Diluted net income
per share

Yen
84.23

The nine months ended December 31,
2020
The nine months ended December 31,
2019

Yen
–

76.81

–

(2) Consolidated Financial Position
Total assets
Million yen
1,950,171
1,904,050

As of December 31, 2020
As of March 31, 2020
(Reference) Shareholders’ Equity:

Shareholders’equity ratio

Total net assets
Million yen
571,860
586,034

As of December 31, 2020: 506,202 million yen

%
26.0
26.6

As of March 31, 2020: 506,781 million yen

2. Dividend Payments
Dividend per share(Record date)

First quarter

Second quarter

Third quarter

Yen

Yen
40.00

Yen

Year ended March 31, 2020–

Year ending March 31, 2021–

Year-end

Annual

–

Yen
40.00

Yen
80.00

–

40.00

40.00

–

Year ending March 31, 2021 (Forecast)(Note) Revision of dividend forecast published most recently: No

3. Consolidated Earnings Forecast (From April 1, 2020 to March 31, 2021)(Figures in percentages denote the year-on-year change.)

Operating profit(loss)Net salesYear ending March 31,
2021

Million yen%

1,460,000-3.7

Million yen

15,000%-60.5(Note) Revision to forecast published most recently: Yes

1

Profit (loss)
attributable toowners of parent

Ordinary profit(loss)
Million yen

32,000%-35.5

Million yen

10,000

Profit(loss) per
share
%

–

Yen

76.50

* Notes(1) Significant changes of subsidiaries during the term (changes in specific subsidiaries accompanied by a change in thescope of consolidation):
Yes
New: - (Company name: - ), Exempt: 1 Company (Company name: Mitsubishi Shindoh CO., LTD)
(Note) For details, please see “(3) Notes on quarterly consolidated financial statements (Changes of significant subsidiaries
during the nine months ended December 31, 2020) ” under “2. Consolidated Financial Statements and Key Notes” on page12.
(2) Application of special accounting treatment in the preparation of the quarterly consolidated financial statements: Yes(Note) For details, please see “(3) Notes on quarterly consolidated financial statements (Application of special accounting
treatment in the preparation of quarterly consolidated financial statements)” under “2. Consolidated Financial Statements
and Key Notes” on page 12.
(3) Changes in accounting policies, changes of accounting estimates and restatement(i)
Changes in accounting policies due to amendments to accounting standards:(ii)
Other changes in accounting policies:(iii) Changes in accounting estimates:(iv) Restatements:

None
None
None
None

(4) Numbers of issued shares (common stock)(i) Numbers of issued shares at end of period (including treasury shares):
Nine months ended December 31, 2020:
131,489,535 sharesYear ended March 31, 2020:
131,489,535 shares(ii) Numbers of treasury shares at end of period:
Nine months ended December 31, 2020:
831,056 sharesYear ended March 31, 2020:
550,160 shares(iii) Average number of shares issued during period (quarterly cumulative period):
Nine months ended December 31, 2020:
130,744,368 shares
Nine months ended December 31, 2019:
130,947,062 shares* This quarterly financial summary is not subject to a quarterly review by certified public accountants or audit firms.
* Explanation about the proper use of financial forecasts and other special notes(Notes concerning forward-looking statements, etc.)
The operating results forecasts and other forward-looking statements contained in this report are based on information
currently available to the Company, as well as certain assumptions that the Company has judged to be reasonable. As such,they do not constitute an assurance that the Company promises to achieve these projected results. Therefore, readers areadvised to note that the actual results may vary materially from the forecasts due to a variety of factors.
Please see “(3) Information on the consolidated earnings forecasts and other future forecasts” under “1. Qualitative
Information on Financial Results for the Nine Months Ended December 31, 2020” on page 6 for the assumptions about
consolidated earnings forecasts.
(Procedure for obtaining supplementary information on quarterly financial results and quarterly financial briefing)
Mitsubishi Materials Corporation plans to hold a quarterly financial briefing for institutional investors on Tuesday,
February 9, 2021. The materials used at this briefing are disclosed on the TDnet and the Company’s web page at the timethat the quarterly financial results are announced.

2

Contents
1. Qualitative Information on Financial Results for the Nine Months Ended December 31, 2020 .................... 4(1) Details of operating results ........................................................................................................................ 4(2) Details of financial position ....................................................................................................................... 6(3) Information on the consolidated earnings forecasts and other future forecasts ......................................... 6
2. Consolidated Financial Statements and Key Notes ......................................................................................... 7(1) Consolidated balance sheets ...................................................................................................................... 7(2) Consolidated statement of profit or loss and consolidated statement of comprehensive income .............. 9
Consolidated statement of profit or loss ...................................................................................................... 9
Consolidated statement of comprehensive income .................................................................................... 10(3) Notes on quarterly consolidated financial statements .............................................................................. 11
Notes on going concern assumption .......................................................................................................... 11
Segment information.................................................................................................................................. 11
Notes on significant changes in the amount of shareholders’ equity, if any .............................................. 12
Changes of significant subsidiaries during the nine months ended December 31, 2020 ........................... 12
Application of special accounting treatment in the preparation of quarterly consolidated financial
statements................................................................................................................................................... 12
Additional information............................................................................................................................... 12
Business combinations and other relationships ......................................................................................... 13
Contingent liabilities .................................................................................................................................. 15
Related to consolidated statement of income ............................................................................................. 16
Important subsequent events ...................................................................................................................... 173

1. Qualitative Information on Financial Results for the Nine Months Ended December 31, 2020
(1) Details of operating results1) Overview of operating results
During the nine months of the consolidated fiscal year, the global economy was in considerable constraints on its economic
activities due to the global spread of COVID-19. Although, in China, the economy appeared to be recovering, but inThailand and Indonesia, economic downturn continued. In Europe, the economic downturn continued as well, while it saw
signs of a recovery in the U.S.
In Japan, due to COVID-19, the employment and income environment continued to struggle. However, exports andindustrial production showed signs of recovery.
Regarding the business environment for the Mitsubishi Materials Group (hereinafter referred to as “the Group”), the Group
was also affected by the global spread of COVID-19. In addition to hike in metal prices, demand in semiconductor-related
sectors remained favorable, while demand in automobile-related sectors substantially declined. Domestic demand for
cement also declined.
Under these circumstances, net sales for the nine months of the fiscal year under review totaled ¥1,079,885 million, down
by 4.0% year-on-year. Operating profit decreased by 34.9% year-on-year to ¥15,595 million, and ordinary profit fell by
18.8% year-on-year to ¥32,019 million. The Company recorded the extraordinary loss of ¥22,370 million as loss on
business restructuring and the extraordinary income of ¥20,085 million as gain on sales of investment securities. As aresult, profit (loss) attributable to owners of parent increased by 9.5% year-on-year to ¥11,012 million.
2) Overview by segments
From the first quarter of this fiscal year, the Company have changed the reporting segments. The details are set forth in “2.
(3) Notes on Consolidated Quarterly Financial Statements (Segment Information).” In this regard, the following year-onyear comparisons are based on the figures for the same quarter of the previous year reclassified into the new categories.
(Advanced Products)(Billion yen)
FY 2020
Q1-Q3

FY 2021
Q1-Q3

Increase / Decrease (%)

Net sales

285.2

251.4

-33.8

（-11.9％）Operating profit (loss)

2.3

-0.6

-2.9

（－％）

Ordinary profit (loss)

3.4

1.9

-1.4

（-42.3％）In the Copper & copper alloy products business, both net sales and operating profit declined due to decreased sales mainlyof automotive products, which were affected by the global spread of COVID-19 and other factors.
In the Electronics materials & components business, while sales of automotive products declined due to the global spreadof COVID-19 and other factors, sales of semiconductor-related products increased. Additionally, the production costs ofpolycrystalline silicon products had decreased. As a result, net sales decreased but operating profit increased.
Consequently, net sales and operating profit for the entire Advanced Products Business decreased year-on-year. Ordinary
profit declined due to the decrease in operating profit.
(Metalworking Solutions Business)(Billion yen)
FY 2020
Q1-Q3

FY 2021
Q1-Q3

Increase / Decrease (%)

Net sales

115.0

88.5

-26.5

（-23.0％）Operating profit (loss)

6.6

-3.4

-10.0

（－％）

Ordinary profit (loss)

5.6

-3.1

-8.8

（－％）

In the Cemented carbide products business, both net sales and operating profit declined, due to decreased sales mainly of
automotive products in major overseas countries excluding China, because they were mainly affected by the global spreadof COVID-19.
In the Sintered products, etc. business, losses increased due to decreased sales of sintered parts, which are the business’s
major products, in major overseas countries excluding China, because of the global spread of COVID-19 and other factors.
Also, on December 4, 2020, as the Company transferred all shares of Diamet Corporation, Diament Corporation, PM
Techno Corporation, Diamet Klang(Malaysia)Sdn. Bhd., and Guangdong Diamet Powder Metallurgy Co., Ltd. are nolonger in the scope of consolidation effective from December, 2020.
Consequently, net sales and operating profit for the entire Metalworking Solutions Business decreased year-on-year.
Ordinary profit declined due to the decrease in operating profit.
4

(Metals Business)(Billion yen)
FY 2020
Q1-Q3

FY 2021
Q1-Q3

Increase / Decrease (%)

Net sales

481.4

521.8

40.4

（8.4％）

Operating profit (loss)

8.9

10.6

1.7

（19.9％）

Ordinary profit (loss)

20.2

22.5

2.3

（11.6％）In the Copper business, net sales increased but operating profit decreased mainly due to regular furnace repairs at PT.
Smelting in Indonesia, as well as deterioration in purchasing conditions of concentrates while production volume increased
year-on-year.
In the Gold and other valuable metals business, both net sales and operating profit increased mainly due to a hike in goldand palladium prices.
Consequently, net sales and operating profit for the entire Metals Business increased year-on-year. Ordinary profit
increased due to the increase in operating profit.
(Cement Business)(Billion yen)
FY 2020
Q1-Q3

FY 2021
Q1-Q3

Increase / Decrease (%)

Net sales

187.6

158.7

-28.8

（-15.4％）

Operating profit (loss)

9.6

6.5

-3.1

（-32.3％）

Ordinary profit (loss)

12.4

7.4

-4.9

（-39.8％）In Japan, net sales decreased but operating profit increased mainly due to lowered energy costs, despite the impact fromthe suspension and delay of construction work in the Tokyo metropolitan and other areas following the spread of COVID19, as well as a decreased demand for disaster recovery works in the Tohoku and Kyushu regions.
Overseas, in the United States, sales volume of ready-mixed concrete decreased, and the operating expenses including raw
materials costs increased. Additionally, in the Coal business in Australia, coal sales prices fell. As a result, both net sales
and operating profit decreased.
Consequently, net sales and operating profit for the entire Cement Business decreased year-on-year. Ordinary profit
declined due to the decrease in operating profit.
(Environment & Energy Business)(Billion yen)
FY 2020
Q1-Q3

FY 2021
Q1-Q3

Increase / Decrease (%)

Net sales

16.6

15.7

-0.8

（-5.2％）

Operating profit (loss)

0.4

0.2

-0.2

（-50.0％）Ordinary profit (loss)

1.5

1.1

-0.3

（-23.7％）In the Energy-related business, both net sales and operating profit decreased due to declined sales in the Nuclear-energyrelated services business.
In the Environmental and recycling-related business, though net sales increased due to the increase in home appliancerecycling and incineration ash processing volume, operating loss increased mainly due to the increase in the costs
accompanied with the launch of a new business and selling, general and administrative expenses.
Consequently, net sales and operating profit for the entire Environment & Energy Business decreased year-on-year.
Ordinary profit declined due to the decrease in operating profit.

5

(Other Businesses)(Billion yen)
FY 2020
Q1-Q3

FY 2021
Q1-Q3

Increase / Decrease (%)

Net sales

209.9

196.1

-13.8

（-6.6％）

Operating profit (loss)

0.6

5.2

4.6

（755.8％）

Ordinary profit (loss)

0.5

5.0

4.5

（831.3％）In the Aluminum beverage cans business, sales of regular cans increased mainly due to an increase in demand for drinking
at home following the spread of COVID-19. Additionally, raw materials costs and energy costs declined. As a result, both
net sales and operating profit increased.
In the Aluminum rolled and processed products business, net sales decreased while operating profit increased mainly due
to decreased depreciation expenses resulting from impairment loss on fixed assets by Mitsubishi Aluminum Co., Ltd. in
the previous fiscal year, as well as effects of cost reduction and other factors, despite decreased sales of mainly automotive
products which were affected by the global spread of COVID-19 and other related factors.
In the businesses, other than the Aluminum beverage cans business and the Aluminum rolled and processed products
business, in aggregate, both net sales and operating profit decreased.
Consequently, net sales for the entire Other Businesses decreased year-on-year, but operating profit increased. Ordinary
profit increased due to the increase in operating profit.

(2) Details of financial position
Total assets at the end of the third quarter of the consolidated fiscal year under review stood at ¥1,950.1 billion, up by¥46.1 billion from the end of the previous consolidated fiscal year.
This was mainly due to an increase in inventories.
Total liabilities were ¥1,378.3 billion, an increase by ¥60.2 billion from the end of the previous consolidated fiscal year.
This was mainly due to an increase in borrowings.

(3) Information on the consolidated earnings forecasts and other future forecasts
The Company has revised the consolidated earnings forecast for the full fiscal year ending March 31, 2021 from theprevious forecast announced on December 16, 2020:
Net sales, operating profit (loss), ordinary profit (loss), and profit (loss) attributable to owners of parent are expected toincrease compared to the previous forecast mainly due to increase in sales of the Copper & copper alloy products and theElectronic materials & components in the Advanced Products Business, the Cemented carbide products in the
Metalworking Solutions Business as well as a hike in metal prices and increases in dividend income from mining
companies in the Metal Business, among others.
Revisions to Consolidated Earnings Forecasts for the fiscal year ending March 31, 2020
(from April 1, 2020 to March 31, 2021)(Billion yen)Previous forecast

Current forecast

1,450.0

1,460.0

0.7％

Operating profit

8.0

15.0

87.5％

Ordinary profit

20.0

32.0

60.0％

Profit (loss) attributable toowners of parent

0

10.0

－％

Net sales

Change (%)(Note) The forecast above is based on economic situations, market conditions and other factors that can be assumed as ofthe date of this announcement; hence the actual result may differ from such forecast due to various factors in the future.

6

2. Consolidated Financial Statements and Key Notes(1) Consolidated balance sheets(Million yen)
As of March 31, 2020
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Machinery and equipment, net
Land, net
Other, net
Total property, plant and equipment, net
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

7

As of December 31, 2020

134,444
217,259
111,409112,908
127,908
254,001(2,470)955,462

131,434
205,419
123,248
118,601
133,322
295,440(2,707)
1,004,758

218,923
216,487
223,888659,298

216,300
207,485
226,493
650,278

35,586
15,90651,492

31,35014,58945,939183,043
58,866(4,112)
237,796
948,588
1,904,050

190,268
63,135(4,208)249,195
945,4131,950,171

(Million yen)
As of March 31, 2020
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term borrowings
Current portion of bonds payable
Commercial papers
Income taxes payable
Provisions
Deposited gold bullion
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Provision for loss on business restructuring
Provision for environmental measures
Other provisions
Retirement benefit liability
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive
incomeNon-controlling interests
Total net assets
Total liabilities and net assets

8

As of December 31, 2020

113,148
191,038－
50,000
10,221
14,424294,312
124,746
797,892

124,780
207,397
20,00080,0004,566
7,755
329,325
112,595
886,42160,000246,578
30,27232,581
6,117
56,312
88,261
520,123
1,318,016

40,000272,362－
28,631
4,486
51,822
94,587
491,889
1,378,311

119,457
92,393274,723(2,157)484,416

119,457
79,234281,410(2,855)477,247

22,80637,520708
28,059(12,212)(16,997)
22,364(2,577)
27,107(18,565)(14,528)
28,95579,252586,034
1,904,050

65,657
571,860
1,950,171

(2) Consolidated statement of profit or loss and consolidated statement of comprehensive income
Consolidated statement of profit or loss
(Million yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Rental income on non-current assets
Share of profit of entities accounted for using
equity method
Other
Total non-operating income
Non-operating expenses
Interest expenses
Expense for the maintenance and managementof abandoned mines
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of investment securities
Gain from transfer of business
Other
Total extraordinary income
Extraordinary losses
Loss on business restructuring
Loss on the Antimonopoly Act
Other
Total extraordinary losses
Profit (loss) before income taxes
Income taxes
Profit (loss)
Profit (loss) attributable to non-controllinginterests
Profit (loss) attributable to owners of parent

Nine Months Ended
Nine Months Ended
December 31, 2019
December 31, 2020
(April 1, 2019 - Dec 31, 2019) (April 1, 2020 - Dec 31, 2020)
1,124,608
1,079,885
986,362
956,764
138,246
123,120
114,308
107,525
23,937
15,5959915
17,841
3,795
3,383

620
15,687
3,796
3,001

2,047
27,983

5,746
28,853

3,699
2,964

3,194
2,619

5,830
12,49539,426

6,614
12,42832,019

2,054
705
220
2,980

20,085199
132
20,417－
10,423
3,469
13,89228,514
14,434
14,0804,021

22,370－2,730
25,101
27,336
11,51915,816
4,803

10,05811,012

Consolidated statement of comprehensive income(Million yen)

Profit (loss)
Other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to ownersof parent
Comprehensive income attributable to noncontrolling interests

Nine Months Ended
Nine Months Ended
December 31, 2019
December 31, 2020
(April 1, 2019 - Dec 31, 2019) (April 1, 2020 - Dec 31, 2020)
14,08015,816

10

4,268

14,222(180)(3,590)633
115(4,077)(8,380)
2,405
465

1,245
15,326

4,635
20,452

12,11618,484

3,209

1,968

(3) Notes on quarterly consolidated financial statements
Notes on going concern assumption
N/A

Segment information[Segment Information]
I. For the nine months ended December 31, 2019 (from April 1, 2019 to December 31, 2019)
1. Information on net sales and income of each reporting segment

Advanced
Products

Metalworking
Solutions
Business

MetalsBusiness

CementBusiness

Environment
Other&
EnergyBusinesses
Business

Total(Million yen)Amountindicated in thequarterly
Adjustment
consolidated
amountstatements ofprofit and loss

Net sales(1) Outside customers

276,428

106,008

360,829

185,117

16,229179,994

1,124,608－

1,124,608(2) Within consolidated
group

8,798

9,074

120,633

2,497

401

29,986

171,392(171,392)－

285,227

115,083

481,463

187,614

16,631

209,981

1,296,001(171,392)

1,124,608

3,405

5,673

20,25012,453

1,548

541

43,873(4,447)39,426

Total
Segment income (loss)(Notes)1. “Other Businesses” include aluminum-related business and engineering-related services.
2. “Adjustment amount” of segment income (loss) of -¥4,447 million includes the elimination of intersegment transactionsof -¥36 million and corporate expenses of -¥4,410 million which are not distributed to the reporting segments.
Corporate expenses consist mainly of general and administrative expenses that do not belong to the reporting segments,
basic experiment and research expenses, and financial income and expenses.
3. Segment income (loss) has been adjusted together with ordinary profit on the consolidated statements of profit or loss.
II. For the nine months ended December 31, 2020 (from April 1, 2020 to December 31, 2020)
1. Information on net sales and income of each reporting segment

Advanced
Products

Metalworking Solutions
Business

MetalsBusiness

CementBusiness

Environment
Other&
EnergyBusinesses
Business

Total(Million yen)Amountindicated in thequarterly
Adjustment
consolidated
amountstatements ofprofit and loss

Net sales
242,387

81,990418,631

156,801

15,335

164,739

1,079,885－

1,079,885

9,037

6,571

103,260

1,915

431

31,416

152,633(152,633)－

251,424

88,561

521,892

158,716

15,766

196,155

1,232,518(152,633)

1,079,885

1,965(3,163)

22,595

7,499

1,182

5,041

35,120(3,100)32,019(1) Outside customers(2) Within consolidated
group
Total
Segment income (loss)(Notes)1. “Other Businesses” include aluminum-related business and engineering-related services.
2. “Adjustment amount” of segment income (loss) of -¥3,100 million includes the elimination of intersegment transactionsof ¥8 million and corporate expenses of -¥3,108 million which are not allocated to the reporting segments. Corporate
expenses consist mainly of general and administrative expenses that do not belong to the reporting segments, basic
experiment and research expenses, and financial income and expenses.
3. Segment income (loss) has been adjusted together with ordinary profit on the consolidated statements of profit or loss.

11

2. Matters regarding the change of the reporting segments, among other changes
The Company has changed its reporting segments as a result of the organizational restructuring made on April 1, 2020.
Consequently, the business related to energy and environmental and recycling-related businesses included in the “Other
Businesses” is now classified as the “Environment & Energy Business” and the business related to aluminum included in
the “Advanced Products” is sectionalized into the “Other Businesses”.
Furthermore, the business related to cement sales included in the “Other Businesses” has been transferred to the “Cement
Business”.
In addition, in order to more properly assess and manage performance of each reporting segment, the Company has
reviewed the method of allocating common costs of the Company and changed the method of calculating the profits orlosses of the reporting segments.
For this reason, the segment information for the nine months of the previous consolidated fiscal year is disclosed herein
according to the changed segmentation and calculation methods of the reporting segments.

Notes on significant changes in the amount of shareholders’ equity, if any
N/AChanges of significant subsidiaries during the nine months ended December 31, 2020
For the first three months ended June 30, 2020, the Group excluded Mitsubishi Shindoh Co., Ltd. which was the Company’s
specified subsidiary company, from the scope of consolidation since it dissolved due to an absorption-type merger with
the Company in which the Company was the surviving company.

Application of special accounting treatment in the preparation of quarterly consolidated financial
statements
The Company calculates tax expenses by rationally assuming an effective tax rate after applying tax effect accounting to
net income before income taxes for the consolidated fiscal year, including the third quarter, and multiplying net income
before income taxes for the nine months by the estimated effective tax rate.

Additional information
Stock-based compensation system
1. Overview of the transactions
The Company introduced a stock-based compensation system (hereinafter referred to as the “System”) for its executive
officers, operating officers and fellows (excluding non-domestic residents, hereinafter referred to as the “Officers”) since
May 2020.
The System adopts a structure called Board Incentive Plan Trust (hereinafter referred to as the “BIP Trust”). The Systemprovides Officers with the shares of the Company and cash equal to the amount of the Company’s shares converted into
cash, according to the Officers’ positions and the like.
2. The Company’s shares remaining in the BIP Trust
The Company recorded the Company’s shares remaining in the BIP Trust as treasury shares in the net assets in an amountof their book value in the BIP Trust (excluding the amount of ancillary expenses). The book value and the number of theCompany’s treasury shares are ¥684 million and 274 thousand shares, respectively, at the end of the third quarter of thecurrent consolidated fiscal year.
(Accounting estimates associated with the spread of COVID-19)
Due to the global spread of COVID-19, the Group’s major business locations in Japan and overseas have been affected bydecreased demand mainly for automotive products.
However, as a result of examinations based on third-party information and others available as of the end of the third quarterof the current consolidated fiscal year, no material change has been made in the assumptions, including the spread in the
future and winding-down timing of COVID-19, described in the Annual Securities Report (Additional information)(Accounting estimates associated with the spread of COVID-19) for the previous consolidated fiscal year.

12Business combinations and other relationships(Sales of shares in subsidiary companies)
The Company has adopted a formal resolution at the meeting of its Board of Directors held on November 25, 2020, totransfer (hereinafter referred to as “the Transfer”) the entire shares of Diamet Corporation (hereinafter referred to as“Diamet”), which is a consolidated subsidiary of the Company, to Endeavor II United Investment Limited Partnership(hereinafter referred to as “Partnership”) for which Endeavor United Co., Ltd. (hereinafter referred to as “Endeavor”)
serves as a unlimited liability partner, and executed the definitive agreement with Partnership on the same date and carriedout the Transfer on December 4, 2020.
Accordingly, PM Techno Corporation, Diamet Klang(Malaysia)Sdn. Bhd., and Guangdong Diamet Powder MetallurgyCo., Ltd., which are the subsidiaries of Diamet and also the consolidated subsidiaries of the Company, have been excluded
from the scope of consolidation.
1. Overview of business divestiture(1) Tradename of successor enterpriseEndeavor II United Investment Limited Partnership(2) Description of divested business
Diamet Corporation
Consolidated subsidiary
Diamet Corporation
PM Techno Corporation
Diamet Klang(Malaysia)Sdn.Bhd.
Guangdong Diamet Powder Metallurgy Co., Ltd.
description of business: Production, R&D and Sales for sintered mechanical parts, Oilless Beariings, Other powder
metallurgy parts(3) Main reason for carrying out business divestiture
Due to deteriorating earnings from the Sintered parts business (hereinafter referred to as the “Sintered parts business”) of
the Group in which Diamet and its subsidiaries and affiliated companies have engaged, the Company has provided financial
support to Diamet, which leads the Sintered parts business, including the underwriting of capital increase and direct loans.
However, as it had been revealed that such support alone is unlikely to be sufficient to improve revenue of the Sinteredparts business, the Company had been discussing plans for the Sintered parts business, including transferring to third parties.
From these circumstances, the Company has reached an agreement with Endeavour to transfer the business to Partnershipaiming at restructuring the business under Endeavour’s leadership, and executed the transfer. Endeavour is a Japanese
investment fund which has extensive experience in business revitalization. The Company believes that a businessrestructuring led by Endeavour is the best way to revitalize and stabilize the Sintered parts business.
(4) Date of business divestiture
December 4, 2020
(5) Other matters concerning overviews of transaction including legal form
Share transfer in which the consideration received is only cash and other assets
2. Overview of implemented accounting procedures(1) Amount of gain or loss on transfer
Loss on business restructuring 22,370 million yen(2) Fair book values of assets and liabilities of transferred business, and major breakdown thereof
Current assets
13,501 million yen
Non-current assets
8,247
Total assets
21,748Current liabilities
39,244Non-current liabilities
601
Total liabilities
39,845(3) Accounting procedures
The Company recorded in the extraordinary losses as loss on business restructuring the amount of the difference between
the book value of Diamet Corporation stated in the consolidated financial statements and its sale value, less the amount ofprovision for loss on business restructuring which was recorded at the end of the previous fiscal year.
3. Reporting segment to which the transferred business of subsidiary company belonged
Metalworking Solutions Business
4. Estimated amount of profit or loss pertaining to the divested business, which is reported on the consolidated statement13

of profit and loss for the nine months of the consolidated fiscal year
Net sales
10,950 million yen
Operating loss
2,277

14

Contingent liabilities(Matters concerning taxation in Indonesia)
Previous consolidated fiscal year (As of March 31, 2020)
On December 30, 2014, PT. Smelting in Indonesia, a consolidated subsidiary of the Company (hereinafter referred to as
the “PTS”) received a notice of reassessment in an amount of US$47 million (¥5,209 million based on the exchange rate
at the end of the previous consolidated fiscal year) from the Indonesian National Tax Authority, regarding the sales
transaction pricing of PTS for the year ended December 31, 2009. On January 28, 2015, the PTS made a provisional depositof US$14 million (¥1,523 million) as part of the additional collection.
However, the PTS submitted a written objection to the Indonesian National Tax Authority on March 25, 2015, because
this assessment, which claimed there was a sales shortage on the part of the PTS based on a comparison of the profit margin
ratio with other companies selected by the Indonesian National Tax Authority, was highly unreasonable and found to beunacceptable by the Company and the PTS.
The written objection submitted by the PTS on March 25, 2015 was dismissed by the Indonesian National Tax Authority
on March 16, 2016. Therefore, the PTS filed a complaint to the tax court on June 6, 2016 to present its fairness of the viewof the Company and the PTS. However, it was dismissed on January 30, 2020. Along with this, the PTS paid theunderpayment amount of deposit of US$33 million (¥3,685 million) on March 23, 2020 and paid a surcharge of US$33
million (¥3,685 million) on April 24, 2020, respectively. However, the court decision ruled by the tax court was
unacceptable to the Company and the PTS, and the PTS appealed to the Supreme Court on June 8, 2020 to present thefairness of the view of the Company and the PTS.
On November 29, 2017, the PTS also received a notice of reassessment in an amount of US$22 million (¥2,484 million)
from the Indonesian National Tax Authority, primarily regarding its posting of gains and losses on hedging for the fiscal
year ended December 31, 2012. On December 27, 2017, the PTS made a provisional deposit of US$6 million (¥685 million)
as part of the additional collection.
However, the PTS submitted a written objection to the Indonesian National Tax Authority on February 27, 2018, because
this assessment was from a point of view that unilaterally negated the basis for recording gains and losses on hedging, etc.
of the PTS and found to be unacceptable by the Company and the PTS.
The written objection submitted by the PTS on February 27, 2018 was dismissed by the Indonesian National Tax Authority
on February 25, 2019. Therefore, on May 17, 2019, the PTS filed a complaint to the tax court in Indonesia to present thefairness of the view of the Company and the PTS.
On December 5, 2018, the PTS also received a notice of reassessment in an amount of US$15 million (¥1,655 million)
from the Indonesian National Tax Authority, primarily regarding its posting of gains and losses on hedging for the fiscal
year ended December 31, 2014. On December 27, 2018, the PTS made a provisional deposit of US$5 million (¥638 million)
as part of the additional collection.
However, the PTS submitted a written objection to the Indonesian National Tax Authority on February 27, 2019, because
this assessment was from a view that unilaterally negated the basis for recording gains and losses on hedging, etc. of the
PTS and found to be unacceptable by the Company and the PTS.
On January 20, 2020, the PTS received a notice from the Indonesian National Tax Authority regarding the written objection
submitted by the PTS on February 27, 2019, and the written objection of the PTS was accepted for US$9 million (¥1,020
million). For US$4 million (¥515 million), for which the written objection was dismissed, the PTS has decided to file acomplaint to the tax court in Indonesia.
In the previous consolidated fiscal year, the total amount for additional collection being disputed by the PTS, including
amounts for the fiscal years described above as well as amounts for the fiscal year ended December 31, 2011, the fiscal
year ended December 31, 2013, the fiscal year ended December 31, 2015, the fiscal year ended December 31, 2016 andthe fiscal year ended December 31, 2018, is US$125 million (¥13,669 million). There are some cases that surcharges may
be imposed depending on the outcome of formal objections or tax trial results.
Third quarter of the current consolidated fiscal year (As of December 31, 2020)
On December 30, 2014, PT. Smelting in Indonesia, a consolidated subsidiary of the Company (hereinafter referred to as“PTS”) received a notice of reassessment in an amount of US$47 million (¥4,954 million based on the exchange rate at
the end of the third quarter of the consolidated fiscal year) from the Indonesian National Tax Authority, regarding the sales
transaction pricing of the PTS for the year ended December 31, 2009. On January 28, 2015, the PTS made a provisional
deposit of US$14 million (¥1,449 million) as part of the additional collection.
However, the PTS submitted a written objection to the Indonesian National Tax Authority on March 25, 2015, because
this assessment, which claimed there was a sales shortage on the part of the PTS based on a comparison of the profit margin
ratio with other companies selected by the Indonesian National Tax Authority, was highly unreasonable and found to beunacceptable by the Company and the PTS.
The written objection submitted by the PTS on March 25, 2015 was dismissed by the Indonesian National Tax Authority
on March 16, 2016. Therefore, the PTS filed a complaint to the tax court on June 6, 2016 to present its fairness of the viewof the Company and the PTS. However, it was dismissed on January 30, 2020. Along with this, the PTS paid theunderpayment amount of deposit of US$33 million (¥3,505 million) on March 23, 2020, and paid a surcharge of US$33
million (¥3,505 million) on April 24, 2020, respectively. However, the court decision ruled by the tax court was
unacceptable to the Company and the PTS, and the PTS appealed to the Supreme Court on June 8, 2020 to present thefairness of the view of the Company and the PTS.
15

On November 29, 2017, the PTS also received a notice of reassessment in an amount of US$22 million (¥2,362 million)
from the Indonesian National Tax Authority, primarily regarding its posting of gains and losses on hedging for the fiscal
year ended December 31, 2012. On December 27, 2017, the PTS made a provisional deposit of US$6 million (¥651 million)
as part of the additional collection.
However, the PTS submitted a written objection to the Indonesian National Tax Authority on February 27, 2018, because
this assessment was from a point of view that unilaterally negated the basis for recording gains and losses on hedging, etc.
of the PTS and found to be unacceptable by the Company and the PTS.
The written objection submitted by the PTS on February 27, 2018 was dismissed by the Indonesian National Tax Authority
on February 25, 2019. Therefore, on May 17, 2019, the PTS filed a complaint to the tax court in Indonesia to present thefairness of the view of the Company and the PTS. On December 16, 2020, regarding the complaint filed by the PTS, thetax court found the provisional deposit of US$14 million (¥1,495 million) as reasonable. For US$7 million (¥814 million)
and a surcharge (¥213 million), for which the suit was dismissed, the PTS has decided to appeal to the Supreme Court inIndonesia.
On December 5, 2018, the PTS also received a notice of reassessment in an amount of US$15 million (¥1,574 million)
from the Indonesian National Tax Authority, primarily regarding its posting of gains and losses on hedging for the fiscal
year ended December 31, 2014. On December 27, 2018, the PTS made a provisional deposit of US$5 million (¥607 million)
as part of the additional collection.
However, the PTS submitted a written objection to the Indonesian National Tax Authority on February 27, 2019, because
this assessment was from a view that unilaterally negated the basis for recording gains and losses on hedging, etc. of the
PTS and found to be unacceptable by the Company and the PTS.
On January 20, 2020, the PTS received a notice from the Indonesian National Tax Authority regarding the written objection
submitted by the PTS on February 27, 2019, and the written objection of the PTS was accepted for US$9 million (¥970
million). For US$4 million (¥490 million), for which the written objection was dismissed, the PTS filed a complaint to thetax court in Indonesia on July 7, 2020 to present the fairness of the view of the Company and the PTS.
At the end of the third quarter of the current consolidated fiscal year, the total amount of additional charges, which PTS
currently disputes, was US$113 million (¥11,712 million). It includes amounts for all fiscal years described above, as wellas amounts for the fiscal year ended December 31, 2011, the fiscal year ended December 31, 2016, the fiscal year ended
December 31, 2016 and the fiscal year ended December 31, 2018. There are some cases that surcharges may be imposed
depending on the outcome of formal objections or tax trial results.

Related to consolidated statement of income*Losses on business restructuring
For the nine months ended December 31, 2020 (April. 1, 2020–December 31, 2020)
The loss on business restructuring of ¥22,370 million consists of loss on sales of investment securities, loss on transfer ofclaims and other items associated with the transfer on December 4, 2020 of share and claims of Diament Corporation, a
consolidated subsidiary of the Company which operates the Sintered parts business, to Endeavor II United Investment
Limited Partnership.

16

Important subsequent events
The Company entered into an agreement concerning financing of ¥100 billion through subordinated loan (hereinafterreferred to as “the Loan”) on February 2, 2021 and implemented it on February 5, 2021.
1. Purpose of financing through the Subordinated Loan
The Company has examined means for raising funds necessary for aggressively developing growth strategies and making
investments on a continuous basis. The Company decided to implement financing through the Loan since the Loam isenable the Company to effectively strengthen its financial structure without diluting any of its equity.
2. Features of the Loan
The Loan has an intermediate nature between equity and liabilities. While it is debt financing which does not cause dilutionof stock value per share, it has similar nature and characteristics to those of equity including optional deferral of interest
payments, ultra-long-term repayment term and subordination nature in liquidation and bankruptcy proceedings. The
Company, therefore, expects each of an equity content of 50% of the amount of financing by each of Rating and Investment
Information, Inc. and Japan Credit Rating Agency, Ltd.
3. Outline of the Subordinated Loan
(1) Amount of financing(2) Date of agreement(3) Date of loan execution(4) Final repayment date(5) Applicable interest rate(6) Replacement restrictions(7) Constraint on interest payments(8) Subordination clause(9) Equity credit rating by rating
agencies(10) Lenders

JPY 100 billion
February 2, 2021
February 5, 2021
February 5, 2056
However, the Company may repay before the due date all or part of the principal
on each interest payment date on or after February 5, 2026.
For the first five years from the loan execution date, fixed interest rate which is thebase fixed interest rate plus the initial spread and from the sixth year and onward,
floating interest rate which is the base floating interest rate plus the spread that is
1.00% step up from the initial spread.
In the event of a prepayment of the Loan before the due date, the Company intends
to raise funds through issuance of common shares or subordinated loan or othermeans within 12 months prior to the prepayment date such that the amount of
capitalization which is recognized as having an equity content, is equal to or greaterthan the recognized equity content of the principal amount to be repaid. Provided,
however, that where the most recent consolidated net D/E ratio is 1.0 times or lessat the time of prepayment, the Company may deduct the amount of an increase inconsolidated shareholders’ equity since the end of September 2020 multiplied by
50%, from the principal amount which is recognized as equity content of theprincipal amount to be repaid.
The Company may defer payment of all or part of interest on the Loan at its
discretion, except when the Company distributes dividends on its common shares.
In the event that liquidation, bankruptcy, corporate reorganization, or civil
rehabilitation proceedings are commenced against the Company, the lenders of the
Loan shall have the right to receive payment after all claims other than subordinatedclaims (which refer to claims under the Loan and claims which have the terms andconditions substantially same as the claims of the Loan; the same applies
hereinafter) are repaid in full. No provision of the agreement concerning the Loan
may be amended in any way that is disadvantageous to creditors other than thecreditors of subordinated claims.
Rating and Investment Information, Inc.: Class 3, 50%
Japan Credit Rating Agency, Ltd.: Equity content: Middle Level, 50%
MUFG Bank, Ltd., Development Bank of Japan Inc.
Mizuho Bank, Ltd., the Norinchukin Bank

17