JFE : Q2 Financial Results Briefing for the Fiscal Year Ending March 2023

JFE Holdings, Inc.

Q2 Financial Results Briefing for the Fiscal Year Ending March 2023

November 4, 2022

Presentation

Moderator: We would now like to begin the financial results briefing of JFE Holdings, Inc.

Today's speakers are Mr. Masashi Terahata, Representative Director, Executive Vice President, and Mr. Toshihiro Tanaka, Senior Vice President.

The duration of the briefing will be 60 minutes, consisting of a 30-minute presentation, a 30-minute question and answer session. Questions will be received in a lump after the presentation.

First, Mr. Terahata, Representative Director and Executive Vice President, will give an overview of the financial results and business outlook announced today.

Terahata: I am Terahata. Thank you for listening.

Due mainly to an increase in profit in the steel business, mainly due to improved spreads, business profit for H1 of FY2022 was JPY187.9 billion, JPY22.9 billion higher than the previous forecast.

Business profit for FY2022 is expected to be JPY255 billion, an increase of JPY20 billion from the previous forecast.

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Currently, we see the economy and demand for steel as being on a recovery track. On the other hand, due to the delay in the recovery of automobile production in Japan, the impact of real estate market in China, and recession in the US and Europe overseas, we expect it will take some time for the market for steel to recover. In light of this situation, we have revised our crude steel production forecast for the current fiscal year downward to approx. 25 million tons from the previously announced forecast of just less than 26 million tons.

On the other hand, however, we see steady results in the improvement of domestic sales prices. Despite the decline in crude steel production, we expect the performance of the steel business to be up from the previous forecast.

In the engineering and trading businesses, we expect to maintain stable earnings for the full year.

The exchange rate is expected to be JPY145 per US dollar in 2H of the FY2022. In the steel business, raw materials prices have settled down, so the excess of foreign currency payments is becoming smaller, and the impact of the yen depreciation is also expected to be smaller.

Regarding dividends, the Board of Directors today resolved to pay an interim dividend of JPY50, taking into account the 1H of the FY2022 performance.

In addition, we plan to explain the progress of the land use study for the Keihin area.

That's all from me.

Tanaka: I would like to explain the contents of the material we have posted on our website today.

The table of contents is as shown.

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First, I would like to present the 1H of the FY2022 results for the Group as a whole, as well as the outlook for the full year.

Please see the financial results for 1H of FY2022 in the blue box. 1H of the FY2022 showed revenue of JPY2,564.3 billion, business profit of JPY187.9 billion, segment profit of JPY181.2 billion, and profit attributable to owners of parent of JPY123.2 billion.

On the far right is a comparison with the forecast announced in August. In terms of profit items, we have revised upward our business profit forecast by JPY22.9 billion and our net profit forecast by JPY23.2 billion compared to the previously announced figures.

Please see the projected annual values in the blue box. The new forecast figures announced this time are revenue of JPY5,260 billion, business profit of JPY255 billion, segment profit of JPY240 billion, and net profit of JPY155 billion. A comparison with the previous announcement is shown on the far-right side. The business profit forecast was revised upward by JPY20 billion and the net profit forecast was revised upward by JPY15 billion.

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Figures by segment are shown on the next page.

Please see the profit items for each segment below the middle row. First, regarding 1H of the FY2022, please refer to the right-hand side, which shows the change from the previously announced forecast. Segment profit for 1H exceeded the forecast by JPY26.2 billion. As you can see, profit exceeded the forecast by JPY28.2 billion in the steel business and JPY5.6 billion in the trading business. On the other hand, in the engineering business, profit was JPY7.9 billion below the previous forecast.

The engineering business posted a loss of JPY3.9 billion for 1H, the first 1H loss since 2005. Factors such as the rising cost of materials and equipment, changing schedule of progress, and the loss of overseas construction projects are among them. I will explain later in the slide of the engineering business.

Despite these negative factors in the engineering business, segment profit for 1H exceeded the previously announced forecast by JPY26.2 billion. As for annual profit, we expect to exceed our forecast by JPY15 billion in the steel business and JPY5 billion in the trading business.

For the engineering business, profit in 1H was significantly below the forecast, but for the full year, we expect to maintain the previous forecast of JPY20 billion.

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