Results for the Fiscal Year Ended May 31, 2012

July 2012
２０１２年７月

Toyo Tanso Co., Ltd.
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Contents

I. Summary of Results for the Fiscal Year Ended May 31, 2012
I - 1.
I - 2.
I - 3.
I - 4.

Key Points of Fiscal 2012 Financial Results
Earnings Trend
Results for the Fiscal Year Ended May 31, 2012
Factors Affecting Changes in Recurring Profit(Fiscal 2011 Cumulative vs. Fiscal 2012 Cumulative)
I - 5. Net Sales by Product and Segment
I - 6. Overview of Operations by Product and Segment
Notes and future outlook
I - 7. Balance Sheet for the Fiscal Year Ended May 31, 2012
I - 8. Statement of Cash Flows for the Fiscal Year Ended May 31, 2012
I - 9. Sales Trends by Region
I - 10. Trends in Capital Investment, Depreciation and R&D Costs
I - 11. Dividend Trend
I - 12. Key Performance Indicator Trends

P. 3
P. 4
P. 5
P. 6
P. 7
P. 9
P. 11
P. 12
P. 13
P. 14
P. 15
P. 16

II. Summary of Forecasts for the Fiscal Year Ending May 31, 2013
II - 1. Earnings Forecast for the Fiscal Year Ending May 31, 2013
II - 2. Factors Affecting Changes in Recurring Profit(Fiscal 2012 Results vs. Fiscal 2013 Forecast)

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P. 17
P. 18

2

I - 1. Key Points of Fiscal 2012 Financial Results
Point 1
Earnings fluctuated significantly in the first half and second half as a result of abrupt changes in the solar cellmarket, particularly in China. In the fiscal year as a whole, record-high sales (38.7 billion yen) and higher
income were recorded.

Point 2
Although solar cell applications for the core Chinese market drove earnings in the first half, this businessentered a sharp correction in the second half. The performance of general industrial and mechanicalapplications remained solid throughout the year.

Point 3We had initially factored in the correction in solar cell applications, and our efforts now will focus on assessing
the timing and extent of the recovery. At this point, we assume that this sector will continue to correct throughout
the first half and gradually recover from the second half, but that a full-scale recovery will take time.

Point 4
We forecast lower sales and income in fiscal 2013 on the assumption that the heavy impact of the standstill insolar cell applications would cancel out expanded sales of products for general industrial applications andlower depreciation costs (resulting from a change in the depreciation method).

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I - 2. Earnings Trend
Despite sharp volatility in solar cell applications, Group aims to return to growth trajectory

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I - 3. Results for the Fiscal Year Ended May 31, 2012
(Unit: Yen, millions)
FY11/5

FY12/5

Change% increase

Net sales

37,55738,714

1,156

3.1 %

Operatingprofit

5,868

6,055

187

3.2 %

(Ratio of operating
profit to net sales)

15.6%

15.6%

Recurringprofit

5,614

6,062

(Ratio of recurring
profit to net sales)

14.9%

15.7%

Net income

3,699

3,466

Net income
per share

178.43 yen

167.20 yen

Exchange rate

84.0 yen/$
112.8 yen/€
12.7 yen/CNY

Copyright © Toyo Tanso Co., Ltd. All Rights Reserved

78.8 yen/$106.7 yen/€
12.4 yen/CNY

Notes
1. Net sales
Although solar cell applications(particularly in China) drove overall
earnings in the first half with
unprecedentedly high sales, this sector
adjusted sharply in the second half. In
contrast, sectors such as general industrial
applications and mechanical applications
were strong performers throughout theyear, offsetting the correction andsupporting overall earnings.
As a result, despite the negative impact of
yen appreciation, record-high sales
amounting to 38.7 billion yen were posted
in fiscal 2012.

447

8.0 %

(232)

(6.3) %

2. Recurring profit and operating profit
The discrepancies between the first andsecond halves of the fiscal year wereentirely due to the decline in sales of solar
cell applications. Despite the strong yen
and the impact of high depreciation
expenses, income increased over theprevious year.
Sales growth in the first half, thebottoming out of sales prices (including
the shift to value-added products) and
improved productivity made particularly
significant contributions to profits.
3. Net income
540 million yen tax penalty was posted in
the first half based on transfer pricing
taxation.

5

I - 4. Factors Affecting Changes in Recurring Profit(Fiscal 2011 Cumulative vs. Fiscal 2012 Cumulative)
Despite strong yen and sharp volatility in H2, sales volume and prices in H1
made a major contribution to higher income in fiscal 2012
(Unit: Yen,millions)H1 reserves were used in H2 asa result of fluctuations in solar
cell market

9,000
8,000

74

230
7,000
1,427
6,000
5,000

133
FY
11/05

Change insales
volumes

4,000

Product
structuredifferences
and change inpricesStreamlining
anddifferencein operating
rates

Change indepreciation
costs

Although prices weakened in
H2, H1 reserves made acontribution

3,000

711
Impact ofexchange
rates

Primarily fuel(kerosene, gas)

277
Change inrawmaterials
prices427
Differencein othercosts

Primarily an
increase inpersonnel costs

FY
12/05

Recurringprofit

2,000
5,614

6,062

1,000
0
Copyright © Toyo Tanso Co., Ltd. All Rights Reserved6I - 5. Net Sales by Product and Segment(Unit: Yen, millions)

40,00037,55738,71437,00034,53135,00031,38130,974

11,144
11,731

30,000

8,098
6,261
8,715

25,000

7,057

15,916

16,184
8,100

7,783

10,000

5,000

0

4,257

6,460

2,031
969

FY 07/5

8,293

893

6,190

1,249

1,087

2,728

3,223

3,585

4,082

3,845

3,994

1,008

2,991

2,735

936
2,269

4,081

3,931

4,598

5,524
7,555

7,947
7,238

1,871
2,682

18,39814,184
1,769

15,00020,341

19,863

17,96820,0009,018

27,924

7,924
1,469
1,047

FY 08/5

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8,948

8,290

6,454

5,939
7,295
1,355
676

FY 09/5

5,802

9,734

10,423

8,885
10,437

6,711
827

908

FY 10/5

1,443
1,149

FY 11/5

1,475879

FY 12/5

1,551
584

FY 13/5(Forecast)7

I - 5. Net Sales by Product and Segment (half-year)(Unit: Yen, millions)21,53522,00020,00020,00019,144
18,41318,0007,215

15,27816,00014,00012,646

12,000

4,000

4,045

11,767

8,573
3,581

3,387
2,803

448
1,041

9,869

4,309

8,529

487
1,228

3,965

3,656

3,983
587

570
409
1,303

483

1,589

1,425

678
1,633

1,972

2,191
1,890

1,873

2,016

499
1,767

1,818
2,001

1,993

1,915
4,382

2,000

2,349

3,950

3,453

5,072

2,761

0

3,929

4,972

10,630

9,233

7,712

6,472

8,000
6,000

17,000

3,982
3,220

10,000

3,836

6,490

5,241

17,178

456

496

411

FY10/5
Q1 + Q2

371

FY10/5Q3 + Q4

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5,747

4,662
690

5,142

5,038

3,908

753

3,910
4,676

4,427

3,742

6,009

612

765

536

457

421

684
282

867
301

FY11/5
Q1 + Q2

FY11/5Q3 + Q4

FY12/5
Q1 + Q2

FY12/5Q3 + Q4

FY13/5
Q1 + Q2(Forecast)

FY13/5Q3 + Q4(Forecast)709

8

I - 6. Overview of Operations by Product and Segment
Notes and future outlook (1/2)
Image of net sales by application
Application

FY12/5
Q1, Q2

FY12/5
Q3, Q4

Notes and future outlook

FY13/5
Q1, Q2 forecast

・ Our core China market continued to expand rapidly through the first half, but concerns of excess

Electronics applications

・
Products for solar cellmanufacturing

Although full-year sales were on par with the previous year’s levels, thanks in part to savings in thefirst half, sales fell by half in the second half compared to the first half. Prices are also in a downturn
overall.

・ Nevertheless, we had anticipated this correction, and continue to maintain that this sector will return
to a medium- and long-term growth trajectory after this temporary correction. The focus has now
shifted to the timing and extent of a full-scale recovery, but at the very least we do not anticipate arecovery in the first half of fiscal 2013.

・ Wafer manufacturers’ operating rates were low overall as a result of the impact of sluggish
Products for single
crystal silicon
manufacturing

semiconductor demand. In particular, the performance of 200mm wafers was lackluster, but gradually
recovered for 300mm wafers.

・ As a result, sales were up slightly over the previous year in the full fiscal year. We expect sales toremain low in the near term, but the weight of this sector is minimal and thus its impact on theGroup’s overall business is modest.

General industries applications
and others

・ Demand for graphite remained strong in core overseas markets, owing to growing demand in the automotive andProducts for EDM
electrode manufacturingconsumer electronics industries due to the modest impact of flooding in Thailand and growth in emerging
economies.
・ In the domestic market, the mold industry faced harsh conditions due to structural problems resulting from the strong
yen, but performance was unexpectedly solid, due in part to the recovery of the automotive industry. We also
anticipate higher sales of high value-added products for precision applications and other sectors.

・Special graphite products

supply emerged in Q3 and the market entered a major correction. Although the market is not declining
further at present, it remains at a standstill. The decline in other markets such as Europe, Asia andJapan was quite low, but growth is sluggish.

Products forcontinuous casting andmetallurgy, etc.

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Performance was solid overall both in Japan and overseas due to the economic recovery andinfrastructure investments in emerging economies. Sales of industrial furnace components and hotpresses remained strong.

・ We expect sales to be strong overall, buoyed by strength in the automotive industry. We will continue
to focus our efforts on expanding sales so that general industrial applications at least partially offset
the decline in solar cell applications.
9I - 6. Overview of Operations by Product and Segment
Notes and future outlook (2/2)
Image of net sales by application
Application

Carbon products forelectrical applications

Carbon products for general industries

Carbon products formechanical applications

FY12/5
Q1, Q2

FY12/5

FY13/5

Q3, Q4

Q1, Q2 forecast

Notes and future outlook
・ Initiatives to expand sales led to improvements in performance. Sales in this sector were strong overall as sales of

Products for generalindustries

mainstay bearings and sealing materials, mainly for pump, air conditioner and plant applications, grew as the
economy recovered. Performance was also bolstered by earthquake reconstruction demand.

・ As a result, sales increased 20% over the previous year in the full year. Although there are some signs of aslowdown, we expect sales to remain solid.

Products fortransport machinery・ Demand for pantograph sliders, which is largely unaffected by economic fluctuations, remains steady thanks toexpanded sales to private railroads. We continue to move ahead with efforts to expand overseas.

・ Conditions were difficult in our core China market as competition intensified and pressure to cut prices heightened
Products for small
motorsIndustrial andautomotive products,
etc.

amidst stagnant growth. Since overseas sales account for a high proportion of net sales, losses caused by the strong
yen came as a severe blow.
・ Nevertheless, since the impact of economic volatility remained relatively small, we forecast a slight increase insales over the medium to long term on the back of demand from emerging economies. Strengthening global costcompetitiveness and development capabilities will be key to our success.

・ Products for industrial and automotive applications were firm on the back of the economic recovery. Sales also
increased for wind power applications and railway car applications, albeit on a small scale.

Three major products

Compound materials and other products

・ Although there were some signs of a recovery in compound semiconductor products (for LED applications), this sector has suffered

SiC coated graphite
products

a reaction after a rapid expansion, followed by a prolonged correction, and the market has still not recovered in earnest.
Nevertheless, interest in energy conservation is increasing, resulting in the growing popularity of applications for lighting inparticular. Accordingly, we expect this sector to gradually recover. Semiconductor-related products for Si-Epi applications had been
picking up again, but this recovery faltered from the second half and performance remains sluggish.

・ Sales of coating products increased only slightly in the fiscal year as a whole, despite reserves in the first half. We expect the partial
correction to drag into the first half of the next fiscal year, but anticipate a steady recovery through the second half. This sector willcontinue to be a growth area over the medium to long term, so we will increase our competitive strength in integrated manufacturing,from material development to processing and coating.

・ Demand for large-scale crucibles for semiconductor manufacturing continued to recover as major customers completed
C/C composite
products

their inventory adjustments. Semiconductor market conditions are harsh, but we expect sales to remain firm. Demand forsolar cell-related products had been robust, but lost steam rapidly both in Japan and overseas in the second half. There were
few projects scheduled for the second half, leading to a lower sales volume.

・ In contrast, demand for products for general industries such as industrial furnaces remained solid. Sales increased 10-20%
over the previous year for C/C products overall in fiscal 2012. However, we expect weak sales going forward, partly due
to the winding down of projects.

・ Driven primarily by automotive applications, sales were strong overall in this sector. Although the outlook forGraphite sheets

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semiconductor applications is uncertain, we expect performance to remain steady, mainly centered on automotive
products.

10I - 7. Balance Sheet for the Fiscal Year Ended May 31, 2012
(Unit: Yen, millions)

May 31, 2011

May 31, 2012

Total assets

65,191

71,900Trade notes andaccounts receivable

13,047

13,124Inventory

12,454

15,688

Tangible fixed assets

26,162

29,210Total liabilities and net
assets65,191

71,900Interest-bearing
debt

2,071

2,738

Capital

7,692

7,692

Net assets

51,74855,064Equity ratio

77.5%

74.4%

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Notes

1. Inventory
Inventory increased 3,233 million yen overthe end of May 2011 as a result of anincrease in raw material inventories due tolower shipments, as well as a systematic
accumulation of intermediate stock.
2. Tangible fixed assets
Tangible fixed assets increased 3,048 million
yen over the end of May 2011 due to an
expansion of the manufacturing facility at
the Takuma Division.

11

I - 8. Statement of Cash Flows for the Fiscal Year Ended May 31, 2012
(Unit: Yen, millions)

FY11/5

FY12/5

Cash and cash
equivalents at the endof the period

7,090

7,205

Changes in cash andcash equivalents

1,288

114

Cash and cash
equivalents at the
beginning of the period

5,802

7,090

CF from operating
activities

7,301

3,964

1. CF from operating activities
Increase in tax payments and inventory

CF from investing
activities(5,380)(3,920)2. CF from investing activities
Despite a rise in capital investment,
accrued amount payable also increased.

CF from financing
activities

(550)

158

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Notes

12

I - 9. Sales Trends by Region➤The ratio of overseas sales to overall shares increased slightly to 60.1% (exceeding 60% for the first time fora fiscal year). However, the ratio fluctuated significantly in the two halves (63.7% in the first half and 55.6%
in the second half), primarily due to volatility in China’s solar cell market.
➤We plan to pursue sales growth in emerging economies in particular to raise the ratio of overseas sales.

Copyright © Toyo Tanso Co., Ltd. All Rights Reserved13I - 10. Trends in Capital Investment, Depreciation and R&D Costs
We will continue to make substantial investments, primarily in large-scale strategic investments(some to be pushed back to the next fiscal year).
Depreciation expenses will decline in the next fiscal year as a result of the change to the straight-line method.

（２Q累計）（２Q累計）

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14

I - 11. Dividend Trend
We expect dividends to be unchanged in fiscal 2013
as we ensure a balance between shareholder returns and reinvestments for growth.

*A 3-for-2 stock split was conducted on June 1, 2007

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I - 12. Key Performance Indicator Trends
Recurring profit ratio reached 15% level (20.3% in H1).
Double-digit ROE set as benchmark for the future.

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II – 1. Earnings Forecast for the Fiscal Year Ending May 31, 2013
(Unit: Yen, millions)

FY12/5

FY13/5

Change% increase

Net sales

38,71437,000(1,714)(4.4) %

Operating profit

6,055

5,500

(555)

(9.2) %

(Ratio of operating
profit to net sales)

15.6%

14.9%

Recurring profit

6,062

5,400

(Ratio of recurring
profit to net sales)

15.7%

Net income

3,466

Net income per
share
Exchange rate

167.20 yen
78.8 yen/$106.7 yen/€
12.4 yen/CNY

Copyright © Toyo Tanso Co., Ltd. All Rights Reserved(662)(10.9) %168.80 yen
80 yen/$
100 yen/€12.7 yen/CNY

1. Net sales
We expect solar cell applications, an area ofconcern, to continue correcting throughout thefirst half, but anticipate a gradual recovery fromthe second half. However, we expect demand for
products for general industry and mechanicalapplications to remain solid.
We expect a recovery in high value-added LED
applications from the second half, but the pacewould be modest. After expanding in theprevious fiscal year, we expect sales of C/Ccomposite products to decline as a result of thecompletion of large-scale projects. As a result,sales of composite material products would beflat overall.
There are many uncertain factors in the second
half, but we forecast a slight decline in sales to37.0 billion yen in light of the aforementioned
factors.

14.6%
3,500

Notes

33

1.0 %

2. Recurring profit and operating profit
We expect a drop in net income, primarily due toa decline in sales volume and lower sales prices,primarily for solar cell applications in the first
half.
Depreciation would decrease by 1.2 billion yen
compared to the previous fiscal year as a resultof the change from the fixed-rate method to thestraight-line method for tangible fixed assets inJapan.
3. Net income
We expect a slight increase in comparison to theprevious fiscal year, when a tax penalty waslevied.

17

II - 2. Factors Affecting Changes in Recurring Profit(Fiscal 2012 Results vs. Fiscal 2013 Forecast)
We anticipate continuing correction in solar cell applications,with weakness in both sales volume and prices.
(Unit:Yen, 100 millions )
80
1
70
60

12
60
Change indepreciation
costs

50
40
30

Impact ofexchange
rates

FY
12/05
Results
Recurring
ProfitStrong sales in general industrial
applications were not enough to compensate
for a slump in solar cell applications.

7
Change insales
volumes

Change in depreciation
method for domestic
equipment (from fixedrate method to straightline method)

5

1

Streamlining
Product
and difference
structurein operating
differences
rates
and change inprices2
Change inrawmaterials
pricesWeak prices for solar cellapplications in China; productmix improved from H2

4
Costs
Changes ininventories
Other

54
FY
13/05
Forecast
Recurring
Profit20
100

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18

Note: This presentation contains “forward-looking statements” and forecasts of business results. Thesestatements are not historical facts but instead represent the Company’s beliefs regarding future
events, many of which, by their nature, are inherently uncertain and out of the Company’s control.
It is possible that the Company’s actual results may differ, possibly materially, from theanticipated results and financial condition indicated in these forward-looking statements.

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19