Regarding the Agreement to Make
Sanyo Special Steel a Subsidiary of
Nippon Steel & Sumitomo Metaland Other Matters
August 2nd, 2018

© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

Overview of Special Steel Business’s Integration & Reorganization
As Is

100％subsidiary

Integrate and EnhanceTechnology andproduct superiority(1) NSSMC will underwritein special steel
Sanyo’s Third Party
Othershareholders
Allotment

15%
Equity method
Mar. 2018 : Enteredinto share purchase affiliateagreement

Jun. 2018 :Made OVAKO
100% subsidiary

Mainly locatedin EuropeMainly locatedin Japan & Asia

OVAKO and Sanyo are both special
steel makers with global top leveltechnology regarding high-cleanlinesssteel for bearing steel etc.

¥67.2bn.

To BeOthershareholders
51％subsidiary(28th, Mar. 2019(Planned) )Sanyo shares
24 mil. shares (¥2,800/share)(2) NSSMC will transfer
all the shares of OVAKO
to Sanyo

100％ subsidiary(28th, Mar. 2019(Planned))

OVAKO Shares¥67.2bn.

Maximizesynergies

among 3 companies© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

2Vision and Expected Synergies
Realize synergies of ¥10 bn. /year as NSSMC group

3by addressing globalization of customers’ business & increasing needs for high-quality special steel products

Efficient production for theNSSMC group as a whole
Establish
Share
optimalproduction operation
structure by know-how
regionMutual useof logistics
networks

Capability to respond tocustomer’s needs
Mutual use ofmarketing & sales
networks

Cost reduction for
procurement

Strengthen
EfficientCentralized
proposalmaterial
capabilities
transportation purchasing
through joint R&D

Stable managementfoundation

NSSMC group’s
synergy

CombineEnhanced by NSSMC groups’
business
support for+globalmanagementfoundations,
technical
Sanyo & OVAKO
capabilities&Synergy
product
Integrated
More than ¥5bn./ydevelopment
business
capabilities
operation© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

4Schedule

Aug 2nd, 2018 – Execution of agreements, (a) making Sanyo Special Steel a subsidiary of NSSMC,(b) transferring all the shares of OVAKO to Sanyo from NSSMC
After Aug, 2018 – Approval from competition authorities in Japan and overseas
Around Feb. 2019 (plan) – Extraordinary general shareholders’ meeting of SanyoMar. 28th, 2019 (plan) – Payment date of Third-Party Allotment
Transfer all the shares of OVAKO to Sanyo
In addition, the policy is to maintain the listing of Sanyo Special Steel on the First Section of the TSE.

Trend of Sanyo Special Steel’s share price(¥/share)

Mar. 15th, 2018
Commencement of discussion regarding
making Sanyo a subsidiary of NSSMC

2,900

Sanyo Special Steel’s Share Price

The reference date(Aug. 1st) = ¥2,924

2,700
2,500

1 month ave.=¥2,800

2,300

3 months ave.=¥2,780

TOPIX Steel Industry INDEXCf.1 Taking OVAKO into NSSMC’s consolidated accounting
BS : End of FY2018.1Q (Apr. to Jun.) ~PL : Taking OVAKO’s FY2018.3Q (Jul. - Sep.) into
NSSMC’s FY2018.3Q (Oct. - Dec.)

27-Jul20-Jul13-Jul

6-Jul

29-Jun22-Jun15-Jun

8-Jun

1-Jun

25-May18-May11-May4-May

27-Apr20-Apr

13-Apr

6-Apr

30-Mar23-Mar

16-Mar

9-Mar

2-Mar

23-Feb

16-Feb

9-Feb(Starting point is indexed to be the same as Sanyo Special Steel’s share price)
2-Feb

2,100

Issue Price= ¥2,800

6 months ave.=¥2,673

Cf.2 Taking OVAKO into Sanyo’s consolidated accounting
BS : End of FY2018.4Q (Jan. to Mar.) ~PL : Taking OVAKO’s FY2019.1Q (Jan. - Mar.) into
Sanyo’s FY2019.1Q (Apr. - Jun.)© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

Overview of NSSMC’s Special Steel Bar & Wire Rod Business<Location>

MuroranSpecial Steel Bar &Wire Rod
Other products

Yawata（Kokura Area）

Muroran
Crude steel
production(FY2017）

5Yawata(Kokura Area)

1.43MMT/year 1.20MMT/year

Initiatives for strengthening
special steel business’ competitivenessYawata (Kokura Area) - Optimize upstream(announced on Mar. 30th, 2016)･Start operating new continuous casting facility in Yawata (FY2019)･Cease upstream processes in Kokura Area (the end of FY2020)･Maintain Kokura’s production level of special steel bar & wire rods

Muroran - Enhance of Joint Venture (Mitsubishi Steel
Muroran Inc.*) with Mitsubishi Steel Mfg. Co., Ltd.
(announced on Apr. 28th, 2017)･Increase volume in outsourced manufacturing of steel billets to MSR*
･Establishment of organization in MSR and technology transfer fromNSSMC to MSR*, to secure the quality of steel billets*MSR = Mitsubishi Steel Muroran Inc.
© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

6

Technology of Sanyo Special Steel・Unique Manufacturing Technology
for High-Cleanliness Steel (“Steel You Can Count On”)
－Development of Manufacturing Process
for Ultra-Cleanliness Steel (SURP：Sanyo Ultra Refining Process)・Leading Bearing Steel Manufacturer in Japan
injector【Application(e.g.)】

oxygen sensor

power steering

differentialknuckle

Sequential casting world record of 100
heats with a single tundish (FY2015)engine valve
connecting rod

Automobile

Ball Bearing
Constant velocity joint

propeller shaft

drive shaft

Antilock Brake System sensor

transmission

hubBearing forWind Power Generation

Contributing to the Development of Society by Providing “Steel You Can Count On”
which has earned a high degree of confidence from the Market in respects ofDevelopment, Quality and Stable Supply© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

Product Lineup of Sanyo Special Steel and OVAKO
High-carbon chromium steel

Bearing steel
Bearing steel

Linear motion bearing

Alloy steel
Shafts for auto

Transmission
gears

7

High cleanliness steel used for bearings,
with higher loads, downsizing effect,and longer service life

Special Steel Market
Gears fordifferencial

High alloy steel
Invar alloy
Precision pipes for electric Hot extrusion
power cableand parts
dies

Isotropic and ultra clean steel withmultidirectional fatigue strength.
Contributes to smart solution of components.

Material in critical partsfor various industries(autos, industrial machinery,wind power generation& robot etc.)

Demand for high-quality
special steel
will continueto grow steadily.

© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

Wear-resistant steel with excellent formability
and weldability which contributes to design
flexibility and longer service life

Low alloyed free cutting steel with exceptional
toughness and fatigue strength.
Contributes to operational efficiency and cost
reduction of component manufacturers.

Main Markets & Locations of Sanyo Special Steel and OVAKO< Market >NorthAmerica< Customers >EuropeJapan< Customers >Asia, North America
OthersAsia< Market >AutosIndustrialmachineryOthers

EuropeAutos

Industrialmachinery

Sanyo Special Steel< Locations >(Himeji city, Hyogo pref.) <History>< Locations >Mahindra SanyoSpecial Steel17th Century : Entered in steelbusiness in Sweden
1916 : Bought by SKF (the largest
global bearing steel maker in Sweden)
2010 : Acquired by Triton Fund2018 : Acquired by NSSMC
Headquarter
Steel mills
Secondaryprocessing mills
Sales offices

cf.

World’s major bearing steel manufacturers
Sanyo Special Steel & OVAKO are the main suppliers for the companies below.
(1) SKF <Sweden>, (2) Schaeffler <German>, (3) NSK <Japan>, (4) NTN <Japan>, (5) JTEKT <Japan>© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

89Financial Highlights of Sanyo Special Steel and OVAKO
CY2017(130¥/€)FY2017

Crude steel

1.30 MMT/year (2EAFs)

1.01 MMT/year (3EAFs)

Sales volume

1.07 MMT/year

0.78 MMT/year

Net sales¥157.4 bn.

€921 mil. （approx. ¥120.0 bn. ）¥7.0 bn.

€15.2 mil. （approx. ¥2.0 bn. ）Net profit【FY2018(E)【Jan.-Jun, FY2018¥8.0 bn.】€26mil. (approx. ¥3.4bn.)】

Total assets¥210.2 bn.

€743mil. （approx. ¥97.0 bn. ）Interest bearingdebt¥28.4bn.

€251mil. （approx. ¥34.6 bn. ）Employees

2,666

Approx. 3,000

Profit(bn.¥/Q)

3.5*Sanyo’s FY18.1Q net
profit incl. gain on step
acquisitions of Mahindra
Sanyo Special Steel(¥1.46bn.)**OVAKO 1Q=Jan.-Mar.
***OVAKO 18.2Q
Net Profit incl. one-off
costs (costs for advanced
redemption of bondsetc.) (€12.2mil.)

2.3

17.
1Q(million EUR/Q)

Ordinary profit

3.9

2.64.0

3.0

2.0

1.7

1.5

3Q

restructuring cost
2930

4140

91.0

1118928(6)Net profit
2Q

32

EBITDA before

18
4Q

1Q

*

17.
1Q

**

© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

Net profit/loss

182Q

1Q

3Q

4Q

2Q

***

10

Basic Concept of Impacts on Sanyo’s Consolidated Net Profit
Cf. Targeted synergy effect
Before tax : more than ¥5.0 bn.
After tax : more than ¥3.5 bn.

Synergy72%
increase

Shares to beissued
through TPA24mil.

Sanyo Special
Steel’soutstanding
shares33mil.

Procure thefunds
necessary foracquiring
all the shares ofOVAKOOVAKO’s
Net profit

Goodwill
amortization
etc.

cf.
Jan.-Jun,FY2018
Net profit¥6.8 bn.
(annualized basis)

Sanyo Special
Steel’s
Net profit© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

Cf.
FY2018(E)Net profit¥8.0 bn.
incl. gain on
step acquisitions of
Mahindra Sanyo Special
Steel (¥1.46 bn.)11(Ref.) About Special Steel
Hot-rolled steel production inJapan(FY 2017)(M MT)Other

0.6

Breakdown by special steel grade(M MT)

Stainless Steel

72.0

20.6

Structural Steel

2.9
High TensileStrength Steel

9.1

5.7
Bearing SteelSpecial Steel
Ordinary Steel

1.0
Free-Cutting Steel

0.6

Tool Steel

0.3
0.4 Spring SteelClassification of Steel
Ordinary Steel─Mild Steel─────Rolled Steel for General Structure(SS), Rolled Steel for Welded Structure(SM),Steel Bars for Concrete Reinforcement(SR,SD), Low Manganese Non-Tempered High Tensile Strength SteelSpecial Steel┬─Structural Steel┬──Mechanical Structural Carbon Steel(S10C, S45C etc.)│└──Mechanical Structural Alloy Steel─Chromium steel(SCr), Chromium Molybdenum Steel(SCM),│Nickel Chromium Molybdenum Steel(SNCM)├─Pressure Vessel Steel─Carbon Steel for Boilers and Pressure Vessels(SB), Chromium Molybdenum Steel for Boilers and Pressure Vessels(SCMV)├─Tool Steel─────Carbon Tool Steel(SK), Alloy Tool Steel(SKD SKT), High-Speed Steel(SKH)└─Steel for Special Use┬(Low-Alloy Steel) Spring Steel(SUP), Bearing Steel(SUJ), Free-Cutting Steel(SUM), Non-Tempered High Tensile Steel├(High-Alloy Steel) Stainless Steel(SUS), Heat-Resistant Steel(SUH), High-Manganese Non-Magnetic Steel└(Carbon Steel) Spring Steel(SUP), Piano Wire Rod Steel(SWRS)© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.

12This presentation does not constitute an offer or invitation to subscribe for or purchase any securities and nothing contained herein shall form the basis of any
contract or commitment whatsoever. This presentation is being furnished to you solely for your information and may not be reproduced or redistributed to any
other person. No warranty is given as to the accuracy or completeness of the information contained herein. Investors and prospective investors in securities of any
issuer mentioned herein are required to make their own independent investigation and appraisal of the business and financial condition of such company and thenature of the securities. Any decision to purchase securities in the context of a proposed offering, if any, should be made solely on the basis of information
contained in an offering circular published in relation to such an offering. By participating in this presentation, you agree to be bound by the foregoing limitations.
This presentation contains statements that constitute forward looking statements. These statements appear in a number of places in this presentation and include
statements regarding the intent, belief or current expectations of Nippon Steel & Sumitomo Metal Corp. or its officers with respect to its financial condition andresults of operations, including, without limitation, future loan loss provisions and financial support to certain borrowers. Such forward looking statements are notguarantees of future performance and involve risks and uncertainties, and actual results may differ from those in such forward looking statements as a result ofvarious factors. The information contained in this presentation, is subject to change, including but not limited, to change of economic conditions, financial marketconditions, and change of legislation / government directives.
Any statements in this document. other than those of historical facts, are forward-looking statements about future performance of Nippon Steel & Sumitomo Metal
Corporation and its group companies, which are based on management’s assumptions and beliefs in light of information currently available, and involve risks anduncertainties. Actual results may differ materially from these forecasts.

© 2018 NIPPON STEEL & SUMITOMO METAL CORPORATION, SANYO SPECIAL STEEL CO., Ltd. All Rights Reserved.