JFE : Financial Results for First Quarter of Fiscal Year 2020 ending March 31, 2021

Securities Code: 5411.T

JFE Group

Financial Results for First Quarter of Fiscal Year 2020 ending March 31, 2021

JFE Holdings, Inc. August 12, 2020

A table of contents

• JFE Holdingsʼ Financial Results for First Quarter of Fiscal Year 2020 (April 1 to June 30, 2020)
• JFE Holdingsʼ Financial Forecasts for Fiscal Year 2020 (April 1, 2020 to March 31, 2021)
• Dividends
• Business Performance by Segment
• • JFE Steel
  • JFE Engineering
  • JFE Shoji
• ESG Initiatives

This presentation material is for information and discussion purpose only.

Any statements in the presentation which are not historical facts are future projections based on certain assumptions and currently available information. Please note that actual performance may vary significantly due to various factors

2

Consolidated Results for First Quarter of Fiscal Year 2020

(April 1 to June 30, 2020)

3

JFE-HD

Financial Results for First Quarter of Fiscal Year 2020

The impact of the COVID-19 outbreak depressed economic conditions substantially both in Japan and overseas.

Revenue was 743.9 billion yen, decreased by 183.5 billion yen from 1Q of FY2019. Business profit was -47.2 billion yen, decreased by 77.9 billion yen.

Profit attributable to owners of parent was -39.1 billion yen, decreased by 58.8 billion yen.

（billion yen）	FY2019		FY2020		Change
1Q (Apr-Jun)		1Q (Apr-Jun)
Revenue	927.4		743.9		(183.5)
Business Profit	30.7		(47.2)		(77.9)
Finance Income/costs	(3.2)		(3.2)		0.0
Segment Profit	27.5		(50.4)		(77.9)
Exceptional Items	－		－		－
Profit before Tax	27.5		(50.4)		(77.9)
Tax Expense and Profit (Loss) Attributable to	(7.7)		11.2		18.9
Non-Controlling Interests
Profit Attributable to Owners of Parent	19.7		(39.1)		(58.8)

Business profit is profit before tax excluding financial income and one-time items of a materially significant value. Segment profit is profit	4
including financial income in business profit.

Financial Results for First Quarter of Fiscal Year 2020 JFE-HD (by Segment)

	(billion yen)	FY2019	FY2020	Change
	1Q (Apr-Jun)	1Q (Apr-Jun)
Revenue
	Steel Business		666.6	508.7	(157.9)
	Engineering Business	113.2	105.0	(8.2)
	Trading Business	286.6	238.0	(48.6)
	Adjustments		(139.2)	(107.9)	31.3
		Total	927.4	743.9	(183.5)
Business Profit	（A）	30.7	(47.2)	(77.9)
Finance Income/Costs	(B）	(3.2)	(3.2)	－
Segment Profit
	Steel Business		14.5	(57.8)	(72.3)
	Engineering Business	4.9	1.5	(3.4)
	Trading Business	7.9	4.4	(3.5)
	Adjustments		0.0	1.3	1.3
	Total	（A+B）	27.5	(50.4)	(77.9)

5

Consolidated Financial Forecast

for Fiscal Year 2020

(April 1, 2020 to March 31, 2021)

6

JFE-HD

Financial Forecast for Fiscal Year 2020

• Business profit for FY2020 is expected to be -100.0billion yendue to the decrease in demand for steel resulting from reduced customer activities.
• 1H is expected to post the deficit of 125billion yendue to lower production levels in Steel Business and lower earnings at subsidiaries.
• In 2H, steel business is expected to eliminate the deficit due to the recovery of customer activities (mainly automobiles) and promotion of profit improvement measures. Additionally, thanks to contributions from the engineering and trading company businesses, business profit is expected to be 25.0 billion yen.

(billion yen)	FY2019 (Actual)	FY2020 (Forecast)	Change
1H	Full Year	1H	Full Year	1H	Full Year
Revenue	1,871.2	3,729.7	1,460.0	3,170.0	(411.2)	(559.7)
Business Profit	49.0	37.8	(125.0)	(100.0)	(174.0)	(137.8)
Finance Income/costs	(6.3)	(12.5)	(7.0)	(15.0)	(0.7)	(2.5)
Segment Profit	42.7	25.3	(132.0)	(115.0)	(174.7)	(140.3)
Exceptional Items	-	(238.8)	-	-	0.0	238.8
Profit before Tax	42.7	(213.4)	(132.0)	(115.0)	(174.7)	98.4
Tax Expense and Profit (Loss)
Attributable to Non-Controlling	(10.8)	15.7	22.0	15.0	32.8	(0.7)
Interests
Profit Attributable to Owners of	31.9	(197.7)	(110.0)	(100.0)	(141.9)	97.7
Parent

7

JFE-HD

Financial Forecast for Fiscal Year 2020 (by Segment)

	（billion yen）	FY2019 (Actual)		FY2020 (Forecast)		Change
	1H	Full Year		1H	Full Year		1H	Full Year
Revenue
	Steel Business		1,353.1	2,681.3		1,010.0	2,240.0		(343.1)	(441.3)
	Engineering Business	238.9	512.2		215.0	490.0		(23.9)	(22.2)
	Trading Business	557.5	1,084.1		430.0	900.0		(127.5)	(184.1)
	Adjustments		(278.3)	(548.0)		(195.0)	(460.0)		83.3	88.0
		Total	1,871.2	3,729.7		1,460.0	3,170.0		(411.2)	(559.7)
Business Profit		49.0	37.8		(125.0)	(100.0)		(174.0)	(137.8)
（A）
Finance Income/Costs		(6.3)	(12.5)		(7.0)	(15.0)		(0.7)	(2.5)
(B）
Segment Profit
	Steel Business		17.7	(8.7)		(145.0)	(145.0)		(162.7)	(136.3)
	Engineering Business	11.9	23.1		6.0	21.0		(5.9)	(2.1)
	Trading Business	14.6	27.0		5.5	12.0		(9.1)	(15.0)
	Adjustments		(1.5)	(15.9)		1.5	(3.0)		3.0	12.9
	Total	（A+B）	42.7	25.3		(132.0)	(115.0)		(174.7)	(140.3)	8

Our countermeasures

JFE-HD

in response to the current business environment

• Implement the emergency measures and put them into concrete to overcome the greatest difficulty since establishment of JFE
• Put the following measures into implementation as group united

Current operation measures（Steel Business）

1. Carrying out cost-minimum operation through production optimization:
   West Japan Works (Kurashiki district) No.4 BF* was shut down and will be refitted in 2021. Banking has been in progress for West Japan Works (Fukuyama district) No.4 BF since June.
2. Continuing temporary off-days for employees:
   Temporary off-days which has been implemented since this May in JFE Holdings and JFE Steel will continue for time being.

Progress of cost reduction and measures for generating cash flows (JFE group)

1. Cost reduction in Steel Business

:Cost reduction of 100.0 billion yen (FY 2020) including the negative effect of production reduction… details in p.19

2. Domestic CAPEX compression in steel business

: 100.0 billion yen (announced in November, 2019)

 130.0 billion yen (FY19-20)	Details
3. JFE Groupʼs asset compression
in the next page

（compression of inventories, sale of cross holding shares etc.）

• 150.0 billion yen (announced in November, 2019)
• • 170.0 billion yen (FY19-20)

9

JFE-HD

Progress of cash flow improvements

Domestic CAPEX compression in steel business

previous (Nov.2019) 100.0 ⇒ updated 130.0 billion yen

Implement further CAPEX compression by careful screening and thorough cost reduction

• Implement steadily necessary investments for safety, environment, disaster prevention, strengthening manufacturing capabilities, stabilizing blast furnace operation, IT and DS

JFE Groupʼs asset compression

previous (Nov.2019) 150.0 ⇒ updated 170.0 billion yen

Domestic CAPEX

(decision making basis)

approx.	130.0
Billion yen

• trillion yen

6th Medium-term	Revised
	business plan	（FY18-20）
	（FY18-20）

Asset compression

Further compression by considering and implementing every type of asset for selling, and revising inventory level

◆ Cross-holding shares:

steadily selling based on a principle of no share holding

◆ Raw material inventories︓

35.0

135.0

billion yen 170.0 billion yen

revising inventory ratio to the lowest level

◆ Finished good inventories:

Optimizing rolling cycle and delivery

billion yen

FY2019 FY2020

10

Dividends

11

JFE-HD

Dividends

• JFE has decided that it unfortunately cannot pay a first-half dividend in response to current earnings.
• A decision regarding the year-end dividend has been postponed while the company carefully monitors its ongoing performance.

12

JFE Steel

Financial Results for First Quarter of

Fiscal Year 2020 and

Financial Forecast for Fiscal Year 2020

13

JFE Steel

Financial Results for First Quarter of Fiscal Year 2020

					FY2019
		Unit						FY2020
		1Q	2Q	3Q	4Q	Full Year		Apr-Jun
Revenue	billion yen	666.6	686.5	652.7	675.5	2,681.3		508.7
Segment Profit	billion yen	14.5	3.2	(6.3)	(20.1)	(8.7)		(57.8)
	Excluding Inventory	billion yen	22.5	(0.8)	8.7	(9.1)	21.3		(34.8)
	Valuation etc.*
Crude Steel	Mt	7.00	6.79	6.24	6.70	26.73		4.79
(Standalone)
Crude Steel	Mt	7.36	7.13	6.59	7.00	28.09		5.09
(Consolidated)
Shipment	Mt	5.85	5.94	5.59	6.09	23.47		4.59
(Standalone)
Export Ratio	%	39.9	42.1	39.7	44.4	41.5		44.2
	on Value Basis
（Standalone）
Average Sales Price	000	80.4	79.4	79.6	76.1	78.8		75.3
(Standalone)	yen/ｔ
Exchange Rate	¥/$	110.7	107.6	108.8	109.4	109.1		107.7
Exchange Rate	¥/$	107.8	107.9	109.6	108.8	108.8		107.7
(End of Term)

＊Excluding inventory valuation, carry over of raw materials and foreign exchange valuation from segment profit

14

72.3 Billion Yen Decrease in JFE Steelʼs Segment Profit	JFE Steel
(FY2019.1Q (Actual) vs. FY2020.1Q (Actual))
（billion yen）

JFE Steel

Segment

Profit

1. Cost

			FY2019			FY2020		Change
								FY2019.1Q
	１Q	２Q	3Q	4Q	Full Year	Apr-Jun		→
		FY2020.1Q
	14.5	3.2	(6.3)	(20.1)	(8.7)	(57.8)		(72.3)

• Fixed cost reduction mainly sourced from repairing cost
  +13.0 and labor cost
• Capital investment effect etc.

2. Volume and Mix

Production and sales volume decreased amid decline in -49.0 demand

（Crude steel (Standalone): 7.00⇒4.79Mt -2.21Mt）

3.	Sales and	＋1.0	（+200 yen/t-shipment）
	Raw materials	Metal spread slightly improved through drop in coking coal
			price, though the price mainly for exports decreased.
4.	Inventory		• Inventory valuation -15.0(-6.0→-21.0)
	valuation	-15.0	• Carry over of raw materials -1.0（＋1.0→±0.0)
			• Foreign exchange valuation＋1.0(-3.0→-2.0)
5.	Others	-22.3	• Decrease in profit of subsidiary companies
		• Increase in loss of disposal and sales of assets etc.

15

JFE Steel

Current business environment

		As the state of emergency made the economy sluggish, the outlook for domestic ordinary steel
	Domestic
	consumption (mainly automobiles) hit the bottom in 1Q of FY2020 (Apr-Jun),and decreased by
		26% year-on-year.
		Automobile sales in each region except Chinain Apr-Jun,2020, significantly decreaseddue to the
	Overseas	stagnated economic activities in each country.
		Economic activity in China bottomed outin Jan-Mar, 2020, and turned into recovery.
	（Mｔ）									【Automobile Sales】
13.0	【Outlook for Domestic Ordinary Steel Consumption】
12.0	12.0	12.2	11.9				60.0%		Year on Year Change
11.0
11.3			40.0%								Thailand
												China
10.0
9.0								20.0%
8.0						8.8		0.
7.0								-20.0%
6.0																India
							-40.0%				Indonesia
5.0
									Accumulated	Apr-Jun. 2019	Apr-Jun. 2020		Y on Y
4.0								-60.0%			Sales	(million units)	(million units)		Change
									China	6.0		6.6		+10.3%
3.0						▲26％				India	0.9		0.2		▲79.9%
					-80.0%			Indonesia	0.2		0.0		▲89.9%
2.0								Thailand	0.3		0.2		▲36.7%
				Year-on-year	-100.0%
1.0						Mar-Jan-AprJun-JulSepDec-OctMar-Jan-AprJun-JulSepDec-OctMar-Jan-AprJun-JulSepDec-OctMar-Jan-AprJun-JulSepDec-OctMar-Jan-AprJun
	1Q	2Q	3Q	4Q	1Q
0.0
		FY19		FY20			2016		2017		2018		2019		2020			16
						JFE Forecast

JFE Steel

Business environment outlook

• The business activity level is expected to recover toward 2H in some sectors, particularly in automotive sector, which is our main customer, while full recovery will take time in some sectors, such as shipbuilding.
• The business activity level in 2H of FY2020 is expected to recover by approximately 20%compared to 1H of FY2020. (Domestic demand for ordinary steel in FY2020 is expected to decrease by approximately 20% year-on-year.)

Domestic

Overseas

Sector		Outlook	FY2020	FY2020
	（vs FY2019 2H）	（vs1H）
			1H	2H
	•	Domestic production is expected to bottom out after the sharp decrease in 1Q of
Automotive		FY2020. Afterwards, gradual recovery is anticipated
	•	Demand in 2H is estimated to increase by 30% from 1H.
Shipbuilding	•	Postponement of negotiations with customers under COVID-19 pandemic reduced the
	number of orders. Therefore, full recovery will take time due to decline in holding
		shipbuilding jobs. Business activity level of 2H is expected to be lowerthan that of 1H.
Civil	•	Compared to the other sectors where business activities have significantly decreased,
	business activity level is relatively stablethanks to the large scale of the
engineering		governmentʼs public work budgets. Its activity level is expected to make a recovery due
		to the budgets and seasonal factors in 2H.
Building	•	Redevelopment projects are forecast to continue to grow steadily, but middle and small
	projects will still remain in low in 2H. Full recovery in this fiscal year is not expected.

• Positive signs can be seen in some regions as the automobile sales in China has
  Automotive recoveredand the automobile sales both in Europe and the U.S. seems to have bottomed out.
• Vigorous demand in China has increased imports of steel products from India since

Steel sheet		April, which has underpinned steel market price in Southeast Asia.
•	Steel market price has turned into increasein the regions where COVID-19
		pandemic has gradually been stamped out.
	•	Postponement of negotiations with customers under COVID-19 pandemic reduced the
Shipbuilding		number of orders. Therefore, full recovery will take time due to decline in holding
		shipbuilding jobs. Business activity level of 2H is expected to be lowerthan that of 1H.
Energy	•	Full recovery will take time because of the continuous lower level of operation, although
	WTI crude oil price bottomed out in April.	17

JFE Steel

Forecast of Production and Metal Spread

1. Forecast of Crude Steel Production

				Crude Steel	Background
			1Q	4.79Mt	Production level was adjusted to the low demand level due to the
			impact of COVID-19outbreak.（4/25~ Stopped Kurashiki No.4 BF,
			（actual）
				6/20~Banking Fukuyama No.4 BF）
			2Q	Approx.5.20Mt	Production level will be around 25% lower than that in the previous FY
		1H	Approx.10.0Mt	although recovery can be seen in some areas.
		2H	Approx.12.0Mt	Crude steel production is expected to increase amid the demand
		recovery mainly for automobiles.
FY2020	Approx.22.0Mt	Crude steel production is expected to be around 20% lower than that
in FY2019.
2.		Metal Spread
•	Asian steel market price and metal spread bottomed out, and recovery can
		currently be seen.
•	Iron ore price is expected to remain high due to Chinese strong demand.
•	Coking coal price is expected to increase as Indian purchase of spot coals will
		increase after the world economy makes a recovery from the impact of COVID-19
		outbreak.
•	Metal spread of export HRC is expected to increase toward the latter half of
		FY2020-1H, and it is expected to be almost flat in 2H compared to 1H.	18

JFE Steel

Countermeasures for Profit Improvement

• Cost reduction

Approx. 100,0 billion yen in FY2020, including variable cost increase amid production reduction

■Fixed cost reduction︓

• Repairing cost reduction

（surely preventing machinery troubles, carefully screening the items to repair)

• Labor cost reduction（temporary day-off, overtime work reduction）
• Expenses reduction etc.

■ Variable cost︓Full-year effects of CAPEX in FY2019

Minimize the disadvantages of production reduction by pursuing optimal production configuration

• Measures to improve steel prices

Continuing close negotiations with customers to realize the appropriate sales price levelwhich meets the added value we offer, including the total process from R&D to services.

• Profitability achievement in steel business in FY2021
• Based on the demand level of 2H of FY2020, we will steadily implement cost reduction measures such as capital investment effects, and achieve profitabilityin FY2021.
• Execution of Structural Reforms

• Considering earlier schedule of structural reforms and earlier realization of the

effectsfor JFEʼs optimization of domestic production operation

19

JFE Steel

Financial Forecast for Fiscal Year 2020

	Unit	FY2019					FY2020
		Full Year	1Q	2Q		1H	2H	Full Year
Revenue	billion yen	2,681.3	508.7	501.3	1,010.0	1,230.0	2,240.0
Segment Profit	billion yen	(8.7)	(57.8)	(87.2)	(145.0)	0	(145.0)
Excluding Inventory	billion yen	21.3	(34.8)	(47.2)	(82.0)	(19.0)	(101.0)
Valuation etc.*
Crude Steel	Mt	26.73	4.79	Approx.		Approx.		Approx.	Approx.
(Standalone)		5.20	10.00	12.00	22.00
						Approx.
Crude Steel	Mt	28.09	5.09	Approx.	5.50
(Consolidated)		10.60
			Approx.		Approx.
Shipment	Mt	23.47	4.59		9.20
(Standalone)		4.60
Export Ratio	%	41.5	44.2	Approx.	42		43
on Value Basis	Approx.
（Standalone）
Average Sales Price	000	78.8	75.3	Approx.	71	Approx.	73
(Standalone)	yen/ｔ
Exchange Rate	¥/$	109.1	107.7	Approx.108	Approx. 108	Approx. 108

＊Excluding inventory valuation, carry over of raw materials and foreign exchange valuation from segment profit	20

136.3 Billion Yen Decrease in JFE Steelʼs Segment Profit JFE Steel (FY2019 (Actual) vs. FY2020 (Forecast))

Segment profit in steel business is expected to significantly decreased from the previous fiscal year amid decrease in production and sales volume, and decrease in profit of subsidiary companies by spread of COVID-19, although cost reduction of 100 billion yen is expected to be achieved.

	JFE Steel			FY2019	FY2020		Change
			Actual	Forecast		（billion yen）
	Segment Profit			(8.7)	(145.0)		(136.3)
1. Cost	+100.0	• Fixed cost reduction mainly sourced from repairing cost and labor
		cost

• Capital investment effect etc.

2.	Volume	-119.0	•	Production and sales volume decreased amid decline in demand
	and Mix	•	（Crude steel (Standalone) 26.73⇒22.00Mt -4.73Mt）
			Product mix deteriorated both overseas and domestic.
3.	Sales and	-23.0	（-1,100yen/t-shipment）
	Raw materials	•	Metal spread shrank with decreased steel price both in domestic
			and overseas market.
4.	Inventory		•	Inventory valuation -25.0(-22.0→-47.0)
	valuation	-14.0	•	Carry over of raw materials +12.0 （-7.0→+5.0)
	•	Foreign exchange valuation -1.0(-1.0→-2.0)
5.	Others	-80.3	•	Decrease in profit of subsidiary companies: -70.0 billion yen etc.
				21

145.0 Billion Yen Increase in JFE Steelʼs Segment Profit JFE Steel (FY2020.1H vs. FY2020.2H)

Segment profit in 2H will remarkably recover from 1H and eliminate the deficit, thanks to increase in crude steel production toward 2H, cancellation of the loss in inventory valuation in 1H, and increase in profit of subsidiary companies.

								（billion yen）
		FY2020 Forecast
	JFE Steel				Change
	1H	2H		Full Year			1H→2H
Segment Profit	(145.0)	0		(145.0)			＋145.0
1.
Cost	+15.0	• Shrink cost increase due to reduced production
		• Fixed cost reduction mainly sourced from repairing cost and
			labor cost
2.	Volume	+40.0	• Recovery of customersʼ activity level (mainly automobiles) is
	and Mix	expected toward 2H.
		（Crude steel (Standalone) 10.00⇒12.00Mt	+2.00Mt）
3.	Sales and		（-500yen/t-shipment）
	Raw materials	-5.0	• Forecast of iron ore price remaining high, and
	increase in coking coal price amid the recovery of
			economic activity
4.	Inventory	＋82.0	• Inventory valuation +63.0 (-55.0→+8.0)
	valuation	• Carry over of raw materials +17.0 （-6.0→+11.0)
			• Foreign exchange valuation +2.0(-2.0→±0)
5.	Others	+13.0	• Increase in profit of subsidiary companies etc.	22

JFE Engineering

Financial Forecast for Fiscal Year 2020

23

【Full Year】 ・Orders

JFE Engineering

Financial Forecast for Fiscal Year 2020

Current Business Environment

• Domestic demands in environmental sector, and social infrastructuresuch as steel structures are expected to remain solid.
• Due to the impact of COVID-19, some overseas projects were suspended. Although new projects in domestic private sector and overseas may be suspended or orders may be postponed, the impact will be limited.
• Segment profit is expected to exceed 20.0 billion yeneven under the spread of COVID-19,maintaining Stable Earnings.

Financial Forecast
			FY2019 (Actual)					Change
				FY2020 (Forecast)
（billion yen）		1H	Full Year		1H	Full Year				1H	Full Year
Orders			189.5	413.0		320.0	500.0			130.5	87.0
Revenue			238.9	512.2		215.0	490.0			(23.9)	(22.2)
Segment Profit			11.9	23.1		6.0	21.0			(5.9)	(2.1)
【1H】
+130.5	Increase in large-scale orders in environmental sector
・Orders
・Revenue	(23.9)	Impact of COVID-19 and decrease in work volume
・Segment Profit (5.9)	Decrease in revenue and construction mix

+87.0 Increase mainly in large-scale orders of public works in environmental and social infrastructure sectors

・Revenue (22.2) Impact of COVID-19 and decrease in work volume ・Segment Profit (2.1) Decrease in revenue

24

JFE Shoji

Financial Forecast for Fiscal Year 2020

25

JFE Shoji

Financial Forecast for Fiscal Year 2020

Current Business Environment

• Global economy decelerates rapidly due to COVID-19, and domestic economic activity stagnates.
• Although there are signs of a recovery in automobile production in Japan,demand for industrial machinery and construction equipment remained weak.
• Customersʼ inventory adjustment becomes serious, leading sluggish cargo movementmainly in Japan.
• Demand for steel products is expected to remain sluggish in 1H due to overseasslow economic recovery.

• To respond to the current situation, implement measures to improve profit and cash flow such as asset compression, expense reduction and screening of investments.

Financial Forecast
		FY2019 (Actual)			FY2020 (Forecast)			Change
(billion yen)		1H	Full Year			1H	Full Year			1H	Full Year
Revenue		557.5	1,084.1		430.0	900.0		(127.5)	(184.1)
Segment Profit		14.6	27.0		5.5	12.0		(9.1)	(15.0)

【1H】

Revenue and profits are expected to decrease both in Japan and overseas due to decrease in sales volume with significant drop in demand caused by the spread of COVID-19.

【Full Year】

Although the global economy and demand is expected to recover gradually in 2H, revenue and profits are expected to decrease from the previous year due to decrease in sales volume caused by the global economic stagnation

26

ESG Initiatives

27

JFE-HD

Included in One of the World's Leading ESG Investment Indices E S G

Included in leading ESG investment indices, "FTSE4Good Index Series"* and 「FTSE Blossom Japan Index」**, at first time

Released on 8th July 2020

*FTSE4Good Index Series

https://www.ftserussell.com/ja/products/indices/ftse4good

The index is developed by FTSE Russell, a member of London Stock Exchange Group, and selects companies demonstrating strong Environmental, Social and Governance (ESG) practices. Itʼs used by a wide variety of market participants when creating or assessing sustainable investment products.

**FTSE Blossom Japan Index

https://www.ftserussell.com/ja/products/indices/blossom-japan

The index is developed by FTSE Russell, and selects Japanese companies demonstrating strong Environmental, Social and Governance (ESG) practices.

Promote ESG initiatives such as climate change, safety and compliance etc. to strengthen the Groupʼs competitiveness and resilience for sustainable growth and contribute to developing sustainable society.

28

			JFE Engineering
					JFE Shoji
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S G
	Engineering Business		Trading Business

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Released on 28th May 2020

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• Contribute to effective use of geothermal energy

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Hachimantai
Geothermal		Japanʼs Non-fossil
Zero-Emission	Urban Energy		Certificate
Plan	(Certificate of CO2-
Corp.
		Electricity	free electricity)
		IWATE COOP

Developed "Dam Optimum Operation System" using AI with Hokuriku Electric Power Co.

Released on 12th June 2020

Predict water flow with high accuracy

⇒Contribute to increasing hydroelectric power

generation

Using AI to predict		Prevent excess dam discharge
inflow with high		to restore dam water level
accuracy		promptly for power generation

Rainfall

prediction

Water flow

		Image of increasing power
Prediction system of water flow to dam
	generation

Newly organized "Renewable Energy Steel Products Team" in July

Released on 10th July 2020

Implement strategy to maximize steel business towards global renewable energy field

・Further expand steel business towards renewable energy field
・Formulate a supply chain model for material processing to meet specific customer needs	29

JFE Engineering

Solutions Promoting Decarbonization -Recycle-

E

S G

J&T Recycling participates in R Plus Japan Ltd.,

a new joint venture of business for used plastics recycling

 Established Jointly with 11 cross-industry companies

Released on 30th June 2020

(commencement of business: June 2020）

• Utilize technology of Anellotech, a US-based biochemical venture company, to promote efficient recycling technology with less environmental load

(aim to commercialize by 2027)

Reduce CO2 emission and energy requirement by using fewer processes than existing chemical recycling through liquefaction process

30

Appendix

31

JFE-HD

Main Financial Data

J-GAAP

	FY12	FY13	FY14	FY15	FY16	FY17	FY18
(bn. Yen, times)
Ordinary Income	52.2	173.6	231.0	64.2	84.7	216.3	221.1
EBITDA	260.6	368.9	421.5	254.4	279.9	388.8	405.9
ROS	1.6%	4.7%	6.0%	1.9%	2.6%	5.9%	5.6％
ROE	2.7%	6.3%	7.7%	1.8%	3.7%	7.6%	8.3％
ROA	1.6%	4.5%	5.5%	1.7%	2.3%	5.2%	5.1％
Debt Outstanding	1,596	1,534	1,501	1,379	1,375	1,331	1,450
Debt/EBITDA Ratio	x6.1	x4.2	x3.6	x5.4	x4.9	x3.4	x3.6
D/E Ratio	76.9%	67.9%	59.0%	56.9%	51.4%	58.1%	62.0％
Profit attributable to owners	71.2	177.4	241.6	58.4	117.8	250.8	285.0
of parent (yen/share)
Dividend	20	40	60	30	30	80	95
(yen/share)
Pay-out Ratio	28.1%	22.5%	24.8%	51.4%	25.5%	31.9%	33.3％

IFRS			Forecast
	FY18	FY19	FY20
			(1H)
(bn. Yen, times)
Business profit	232.0	37.8	-125.0
EBITDA ＊1	428.2	269.4	-10.0
ROS ＊2	6.0%	1.0%	-8.6%
ROE ＊3	8.6％	-	-13.9%
11.1%
ROA ＊4	5.0％	0.8%	-5.4%
Interest-bearing debt	1,524	1,814	1,950.0
outstanding
Debt/EBITDA	x3.6	x6.7	ー
multiple
D/E Ratio ＊6	68.2％	96.4%	110.3%
Profit attributable to owners	283.8	-343.4	-19.1
of parent (yen/share)
Dividend	95	20	0
(yen/share)
Pay-out Ratio	33.5％	ー	ー

Notes	＊1	EBITDA = Business profit + Depreciation and Amortization
[IFRS]	＊2	ROS = Business profit / Revenue
	＊3	ROE = Profit attributable to owners of parent company / Equity
	＊4	ROA = Business profit / Total assets
	＊5	Debt/EBITDA ratio = Interest-bearing debt outstanding / EBITDA
	＊6	D/E ratio = Interest-bearing debt outstanding / Equity attributable to owners of parent	32
		For debt having a capital component, a portion of its issue price is deemed to be capital, as assessed by rating agencies.

JFE-HD

Interest-bearing Debt Outstanding

Interest-bearing

（billion yen）	Debt Outstanding	（billion yen）
2,000.0	200.0
	（Left axis）

1,800.0

1,600.0

1,400.0

1,200.0			Cash and deposit
			130.0
1,000.0			（Right axis）
	1,950.0
1,814.3
800.0

600.0	86.7

400.0

200.0

0.0
End of September, 2020
End of March, 2020
	（Forecast）

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0.0

Commitment line for secure adequate liquidity (700.0 billion yen)

has not yet been exercised.

33

JFE Steel

Progress of Initiatives of Steel Business (Domestic)

（Structural Reforms and Initiatives to Reinforce Manufacturing Capabilities in Japan）

Attempt to further strengthen competitivenessby investing strategically in its domestic steelworks

Shut down	Planning to operate (in progress)
In operation		FY19	FY20	FY21	FY22	FY23
	Upstream Facilities					Shut
					down
Keihin	Hot rolling					Shut
District	Facilities					down
	Cold-rolling & Hot-dip		Shut down PLTCM・
	Galvanizing Facilities		3CGL			Refit No.6 BF
Chiba	Blast Furnace			Facilities manufacturing steel sheet
	Shut down 2ETL・2CAL
District	Tin Mills	for cans to be shut down
	Blast Furnace				Refit	Renew
				No.4 BF
				air blast flow
Kurashiki	Continuous		Install new
District	Casting Machine		Continuous Casting Machine	Reinforce Electrical Steel
	Electrical Steel					Sheet Production Line
	Sheet Facilities
	Coke Oven		Renewed No.3 Coke		Renew No.3 Coke
Fukuyama			Oven(A)		Oven(B)
Sintering Machine		Installed new Sintering Machine
District
	Energy Plants		Install No.2 power generator in Joint Thermal Power
						34

JFE Steel

Progress of Initiatives of Steel Business (Overseas)

Promote initiatives to enhance new earning bases

Done	Plan (in progress)

FY18

FY19

FY20

FY21

FY22

FY23

Established the new Global Business Development Center

Head

• To maximize earnings from existing overseas businesses

[China・Iron powder]• To develop new growth opportunities

BJCMX started commercial production

Auto-	[China・Specialty steel for bars and wire rods]	Considering to both expand
Signed contract of JV, BJSS
mobile	[Mexico・Steel sheets for automobiles]	business in overseas and transfer
	Started NJSM production	technology

		[China・Materials for lithium-ion batteries]
		Anode materials to start commercial production
Infra-
structure		Started Color-coating Line operation
materials
	JMM⼯場外観（ティラワ⼯業団地内）	[UAE・ Large-diameter welded pipe]
Energy
	AGPC started commercial production
Partnersʼ	[Vietnam] FHS No.2 BF started operation
upstream	[Australia・Coking Coal] Byerwen Coal Pty Ltd started shipment of hard coke
facilities		[India] Expansion in JSW Dolvi steelworks to be completed
etc.

・BJCMX︓Shanghai Baowu JFE Clean Iron Powder Co., Ltd. ・BJSS︓ BaoWu JFE Special Steel Co., Ltd.	35
・JMM: JFE MERANTI MYANMAR CO., Ltd. ・NJSM︓NUCOR-JFE STEEL MEXICO ・AGPC︓AL GHARBIA PIPE COMPANY

29.4 Billion Yen Decrease in JFE Steelʼs Segment Profit	JFE Steel
(FY2020.1Q (Actual) vs. FY2020.2Q (Forecast))
					（billion yen）
JFE Steel		FY2020 Forecast			Change
1Q (Actual)	2Q (Forecast)	1H		1Q→2Q
Segment Profit	(57.8)	(87.2)	(145.0)		(29.4)

1.	Cost		•	Fixed cost reduction mainly sourced from repairing cost
		+15.0		and labor cost
		•	Capital investment effect
			•	Suppress cost increase due to reduced production etc.
2.	Volume		Despite the recovery of crude steel production after 1Q,
	and Mix	+2.0	mix will be deteriorated.
	（Crude steel (Standalone) 4.79⇒5.21Mt +0.42Mt）
3.	Sales and	-17.0	（-3,700yen/t-shipment）
	Raw materials	In spite of the decrease of coking coal price, metal spread
	will shrink due to decline in steel market price.
4.	Inventory		•	Inventory valuation -13.0(-21.0→-34.0)
	valuation	-17.0	•	Carry over of raw materials -6.0（±0.0→-6.0)
	•	Foreign exchange valuation +2.0(-2.0→±0.0)
5.	Others	-12.4	•	Decrease in profit of subsidiary companies
•	Assets inventory reduction, disposal acceleration etc.

36

162.7 Billion Yen Decrease in JFE Steelʼs Segment Profit JFE Steel (FY2019.1H (Actual) vs. FY2020.1H (Forecast))

									（billion yen）
	JFE Steel		FY2019	FY2020			Change
				FY2019.1H
		1H (Actual)	1H (Forecast)
					→FY2020.1H
	Segment Profit			17.7	(145.0)			(162.7)
1.	Cost
＋46.0	• Fixed cost reduction mainly sourced from repairing cost and
		labor cost		etc.
				• Capital investment effect
2.	Volume			• Production reduction amid the decline in demand.
	and Mix	-88.0	（Crude steel (Standalone) 13.79⇒10.00Mt	-3.79Mt）
	• Mix will be deteriorated.
3.	Sales and	-9.0	（-1,000yen/t-shipment）
	Raw materials	Metal spread for exports will shrink.
4.	Inventory			• Inventory valuation -49.0(-6.0→-55.0)
	valuation	-59.0	• Carry over of raw materials -11.0（+5.0→-6.0)
	• Foreign exchange valuation +1.0(-3.0→-2.0)
5.	Others	-52.7	• Increase assets disposal	etc.
				• Decrease in profit of subsidiary companies

37

118.6 Billion Yen Decrease in JFE Steelʼs Segment Profit JFE Steel (FY2019.2H (Actual) vs. FY2020.1H (Forecast))

								（billion yen）
		JFE Steel			FY2019	FY2020		Change
					FY2019.2H
				2H (Actual)	1H (Forecast)		→FY2020.1H
		Segment Profit			(26.4)	(145.0)		(118.6)
1.	Cost			• Fixed cost reduction mainly sourced from repairing cost and labor
			+40.0	cost
			• Capital investment effect
					• Suppress cost increase due to reduced production etc.
2.	Volume	-72.0	• Production reduction amid the decline in demand
		and Mix	（Crude steel (Standalone) 12.94⇒10.00Mt -2.94Mt）
					• Mix will be deteriorated.
3.	Sales and	-10.0	（-1,100yen/t-shipment）
		Raw materials	Metal spread will shrink amid the decline in market price
					overseas.
4.	Inventory	-37.0	• Inventory valuation -39.0(-16.0→-55.0)
		valuation	• Carry over of raw materials +6.0 （-12.0→-6.0)
		• Foreign exchange valuation -4.0(+2.0→-2.0)
5.	Others	-39.6	• Decrease in profit of subsidiary companies

38

37.7 Billion Yen Decrease in JFE Steelʼs Segment Profit

JFE Steel

(FY2019.4Q vs. FY2020.1Q)

（billion yen）

JFE Steel

FY2019

FY2020

Change

1Q

FY2019.4Q

1Q

2Q

3Q

4Q

Full Year

→FY2020.1Q

Segment

14.5

3.2

(6.3)

(20.1)

(8.7)

(57.8)

(37.7)

Profit

1.

Cost

• Fixed cost reduction mainly sourced from repairing cost

+9.0

and labor cost

• Capital investment effect

etc.

2.

Volume

-39.0

• Production reduction amid the decline in demand

and Mix

（Crude steel (Standalone) 6.70⇒4.79Mt -1.91Mt）

3.

Sales and

+1.0

（+200yen/t-shipment）

Raw materials

Metal spread increased due to decline in coking coal price

4.

Inventory

-12.0

• Inventory valuation -16.0(-5.0→-21.0)

valuation

• Carry over of raw materials +6.0 （-6.0→±0.0)

• Foreign exchange valuation -2.0(±0.0→-2.0)

5.

Others

+3.3

• Decrease in profit of subsidiary companies

• Asset disposal concentrated in 4Q of FY19 etc.

39

Domestic

Market Environment

Combined Inventories of HR, CR and Coated Steel Sheet

JFE Steel

5,000	(000t)					(Month)	5
			Maker		Whole Saler		Coil Center	Inventory Ratio (right axis)

4,500
4,000																	4
3,500
3,000																	3
2,500
2,000																	2
1,500				This month		Month-over-month			Year-on-year
1,000		Unit︓000ｔ		Jun, 2020			Volume		From			Volume		From			1
			Volume				previous month				previous year
				[May, 2020]			[Jun, 2019]
		Combined inventories							[Change]					[Change]
			4,302			4,462		-160		4,573		-271
500		of HR, CR, & Coated
					（-3.6%)			(-5.9%)
		steel sheet
0		Inventory ratio		4.26			4.07		0.19UP			2.60		1.66UP			0
	（month）
Jan	Mar	May Jul Sep Nov Jan	Mar	May Jul	Sep	Nov	Jan Mar	May	Jul Sep Nov	Jan	Mar	May Jul	Sep	Nov Jan	Mar	May
		2016		2017				2018			2019		2020	40

		Domestic					JFE Steel
		Inventories of Plate (Plate Shear)
		Market Environment	and Wide Flange Shapes
(000t）Inventories of Plate (Plate Shear) (Month）	(000t）Inventories of Wide Flange Shapes(Month）
500			3.5	250		Inventories	3.5
		Inventories

Inventory Ratio (right axis)

450									3.0	200
400									2.5
										150
350									2.0
										100
300									1.5
				Month-over-month	Year-on-year		50
250		This month	1.0
Unit︓000ｔ		From			From
	Jun, 2020	Volume	previous		Volume
		Volume			previous year
			[May, 2020]	month		[Jun, 2019]
					[Change]			[Change]
	Inventories
	371		381	-10		437	-66
	of plate
		(-2.6%)		(-15.1%)
200	shear								0.5	0
Jan Mar May Jul	Sep Nov Jan	Mar May Jul Sep Nov Jan Mar	May Jul Sep Nov Jan Mar May
	2017			2018			2019	2020

3.0

2.5

2.0

This month

Month-over-month

Year-on-year

1.5

Unit︓000ｔ

Jun, 2020

Volume

From

Volume

From

Volume

previous month

previous year

[May, 2020]

[Jun, 2019]

[Change]

[Change]

Inventories of

166

178

-12

220

-54

wide flange

(-6.7%)

(-24.5%)

shapes

1.0

Jan

Mar May Jul

Sep

Nov Jan Mar

May

Jul Sep

Nov

Jan Mar May

Jul

Sep Nov

Jan

Mar May

2017

2018

2019

2020

41

Domestic

JFE Steel

Market Environment Trend of Import Steel (Ordinary Steel)

600	(000t)
S.Korea	China	Taiwan	Others

500
400
300
200		Month-over-month	Year-on-year
Unit︓000t	This month		From		From
Volume	previous	Volume	previous
Jun, 2020
100	[May, 2020]	month	[Jun, 2019]	year
		[Change]		[Change]
Import steel	327	344	▲17	389	▲62
(▲4.9%)	（▲15.9%)
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

2016

2017

2018

2019

2020

42

Overseas	JFE Steel
Crude Steel & Im/Export, China
Market Environment

（Mｔ）				Export (Left axis)	Import (Left axis)		（Mｔ）
12										100
										90
10										80
8										70
										60
6				Jun 2020	Jan-Jun, 2020			50
				Mt	Y on Y	Mt	Y on Y			40
				Change	Change
4
Crude Steel	91.6	+4.6%	504.0	＋2.5%			30
	Export		3.7	▲30.3%	28.7	▲16.6%			20
2
										10
0										0
	Jan Mar May	Jul	Sep Nov Jan Mar May Jul	Sep Nov Jan Mar May Jul	Sep Nov Jan Mar May	Jul	Sep Nov Jan Mar May
	2016			2017		2018	2019	2020

Crude steel in Jan. and Feb.: WSAʼs estimation 43

Overseas	Inventories in China by Product
Market Environment

（千ｔ）

100%

35,000

Bar

Rod & Wire

Plate

HR

CR

Change by previous year (%)

30,000

50%

25,000

0%

20,000

-50%

15,000

-100%

10,000

-150%

This month

Month-over-month

Year-on-Year

5,000

Fromprevious

From previous

-200%

Unit︓000ｔ

Jun, 2020

Volume

Volume

Volume

[May, 2020]

month

[Jun, 2019]

year

[Change]

[Change]

Inventories in

14,327

15,492

-1,165

11,460

+2,867

0

China

(-7.5%)

（+25.0%)

-250%

Jan Mar May

Jul

Sep Nov Jan

Mar

May Jul

Sep Nov

Jan

Mar

May Jul

Sep Nov Jan

Mar

May Jul

Sep

Nov Jan

Mar

May

2016

2017

2018

2019

2020

44

Overseas

Market Environment

（$/t) 700

600

500HRC

400

300

200

100 Metal Spread

0

Metal Spread Trend (Chinese Spot Basis)

JFE Steel

（$/t) 700

600

500

400

300

200

100

0

Metal Spread ＝ HRC Price － Raw Materials Cost

*HRC Price︓ Chinese Spot basis	45
Raw Materials Cost︓ Calculated from market price of Iron Ore and Hard Coking Coal

Domestic	JFE Steel
Price Trend of Import Steel
Market Environment

(000 yen/ton)

70

65

60

55

50

45

40

Jan Mar May Jul Sep	Nov Jan Mar May Jul Sep Nov Jan Mar	May Jul Sep	Nov Jan Mar May Jul Sep Nov	Jan Mar May Jul	Sep Nov Jan Mar May
2015	2016	2017	2018	2019	2020

Data: The Japan Iron and Steel Federation Import Steel from S. Korea

46

JFE Steel

Raw Materials Raw Materials Price

Iron ore (iron ore fines from Australia)

($/DMT)

Coking Coal （Hard Coking Coal from Australia)

($/WMT)

$130	Spot FOB	$400
	Spot FOB
$120	Term-contract FOB	Term-contract FOB
$350
$110
$100		$300
$90		$250
$80

$70

$200

$60

$150

$50

$40

$100

$30

$50

17/1

17/4

17/7

17/10

18/1

18/4

18/7

18/10

19/1

19/4

19/7

19/10

20/1

20/4

20/7

17/1

17/4

17/7

17/10

18/1

18/4

18/7

18/10

19/1

19/4

19/7

19/10

20/1

20/4

20/7

Hard Coaking Coal Term-contract FOB since Apr-Jun quarter 2017
（Apr-Jun︓Mar-May spot FOB average, Jul-Sep︓Jun-Aug spot FOB average,
Oct-Dec︓Sep-Nov spot FOB average, Jan-Mar︓Dec-Feb spot FOB average)	47

JFE Steel

Raw Materials Trend of Metalʼs Market Price

(￠ /lb)		FeCr														(U$/t)	Zn
180																			3,800
160																			3,300
140																			2,800
120																			2,300
100																			1,800
80																			1,300
60																				800
2015.1	2015.7	2016.1	2016.7	2017.1	2017.7		2018.1	2018.7	2019.1	2019.7	2020.1		2020.7
					2015.1	2015.7	2016.1	2016.7	2017.1	2017.7	2018.1	2018.7	2019.1	2019.7	2020.1	2020.7
(U$/t)	FeMn														(U$/lb)	Mo
1,600																	14.0
1,400																	12.0
1,200																	10.0
1,000																		8.0
800																		6.0
600																		4.0
400																		2.0
2015.1	2015.7	2016.1	2016.7	2017.1	2017.7	2018.1	2018.7		2019.1	2019.7	2020.1	2020.7
					2015.1	2015.7	2016.1	2016.7	2017.1	2017.7	2018.1	2018.7	2019.1	2019.7	2020.1	2020.7	48

	JFE Steel
Raw Materials	Trend of Sub Materialʼs Market Price

(yen/t) Scrap

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

2015.1

2015.7

2016.1

2016.7

2017.1

2017.7

2018.1

2018.7

2019.1

2019.7

2020.1

2020.7

($/B) Spot Bulker

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

2015.1

2015.7

2016.1

2016.7

2017.1

2017.7

2018.1

2018.7

2019.1

2019.7

2020.1

2020.7

(yen/t)	LNG									Oil
100,000												(crude oil: $/bbl)	WTI crude oil（Left axis）
90,000												130
80,000														Bunker(Japan VLSFO (Right axis)
											110			Bunker(Japan 380CST) (Right axis)
70,000
60,000												90
50,000
											70
40,000
30,000												50
20,000												30
10,000
											10
0
2015.1	2015.7	2016.1	2016.7	2017.1	2017.7	2018.1	2018.7	2019.1	2019.7	2020.1	2015.1	2015.7	2016.1	2016.7	2017.1	2017.7	2018.1	2018.7	2019.1	2019.7

(bunker oil: $/t) 700 600 500 400 300 200 100 0

2020.1	2020.7	49

Orders by Business Field

JFE Engineering

					（billion yen）
Business Field	FY2019	FY2020	Change		Main Orders received in FY2020 1Q
Actual	Forecast
					Construction of waste treatment plant [Fukui]
Environment	187.1	260.0	72.9		Improvement works of waste treatment plant [Hiroshima]
					Improvement works of Tsubame-Yahiko water purification
					plant [Niigata]
Energy	109.8	120.0	10.2		Construction of BOG treatment related facility [Sakai,
					Osaka]
Social	116.1	120.0	3.9		Reconstruction works of domestic bridges [No.1 Shimizu
infrastructure
etc.					grade Yasaka viaduct, Shizuoka]
Total	413.0	500.0	8.7

50

JFE-HD

Links to the reports published during FY2019

Report	URL	QR code
JFE Group REPORT	https://www.jfe-
2019	holdings.co.jp/en/investor/library/gro
	up-report/index.html
JFE Group CSR	https://www.jfe-
REPORT 2019	holdings.co.jp/en/csr/pdf/csr2019e.p
	df
JFE Group CSR	https://www.jfe-
REPORT 2019	holdings.co.jp/en/csr/pdf/environmen
Environmental Data	t2019e.pdf
Book
IT REPORT 2019	https://www.jfe-
	holdings.co.jp/en/investor/library/itre
	port/index.html

51

Copyright © 2020 JFE Holdings, Inc. All Rights Reserved

52