Mitsubishi Materials : Notice Regarding Partial Revision to Medium-Term Management Strategy

	May 14, 2021
To All Concerned Parties
Company name	Mitsubishi Materials Corporation
Representative	Naoki Ono, Chief Executive Officer
	(Securities code: 5711, First Section, Tokyo
	Stock Exchange)
Contact for inquiries	Yuji Omura, General Manager, Corporate
	Communications Dept.
	(Tel: [phone])

Notice Regarding Partial Revision to Medium-Term Management Strategy

Mitsubishi Materials Corporation (hereinafter referred to as "the Company") hereby announces a partial revisions to the Medium-Term Management Strategy (hereinafter referred to as "FY2023 Strategy") for the period from the fiscal year ended March 31, 2021 (hereinafter referred to as "FY2021") to FY2023, which was released on March 25, 2020 (then, partially revised on June 2, 2020). This revision was made in response to the changes in the business environment caused by the COVID-19 pandemic and its impact on the medium- to long-term business outlook. Details as described below.

1. Reasons for revisions to FY2023 Strategy

At the time of the announcement of the FY2023 Strategy on March 25, 2020, the Company had not factored in the impact of the global pandemic of the COVID-19 infection because the changes in the business environment and the impact on the medium- to long-term business outlook were extremely uncertain.

In consideration of the recent trends in the business environment and its impact on business performance, the Company has revised the FY2023 Strategy on the assumption that the business environment for FY2023 would recover to the level before the global spread of COVID-19.

At the same time, in order to optimize the business portfolio, the Company subdivided the Electronic materials & components business and clarified the positioning of each business in the business portfolio. Furthermore, with regard to the digital transformation (hereinafter referred to as "DX") strategy within the Corporate Strategy, the Company has specified the themes and plans based on the initiatives taken in FY2021.

No other major revisions have been made. The Company will continue to make efforts based on the long-term goals and strategies of each business as set forth in the FY2023 Strategy in order to contribute to the creation of a "Richer Society", a "Recycling-Oriented Society", and a "Decarbonized Society", which are the mission of the Company from FY2031 to FY2051.

2. Overview of revised FY2023 Strategy

1) Financial plan

The achievement of the targets for ROIC, EBITDA, etc. for FY2023 announced on March 25, 2020 is expected to be delayed until FY2023 or later. Therefore, the Company has positioned the FY2023 Strategy period as a period to improve ROIC and solidify the foundation for efficiency and profitability, which will lead to a firm growth path in FY2024 and beyond.

(1) Financial target

The Company's financial targets for FY2023 after the revision are ROIC of 4.0% (6.0% before the revision), ROA of 2.0% (4.0%), ROE of 6.0% (7.0%), consolidated operating profit of ¥29 billion(¥58 billion), consolidated ordinary profit of ¥38 billion(¥75 billion), and net D/E ratio of 1.0times or less (1.0times or less).

(2) Investment policy

The Company has factored in growth investments and other investments, which had not yet been determined at the time of the announcement of FY2023 Strategy on March 25, 2020, while having postponed some of its investments, mainly in the Advanced Products Business and the Metalworking Solutions Business. For the period of the FY2023 Strategy, total investment is estimated to be ¥355 billion (¥360 billion before the revision), with a growth strategy investment of ¥195 billion (¥190 billion) and maintenance and upgrading investment of ¥160 billion (¥170 billion). Financial resources for investment will be generated by using cash flow from operations and proceeds from business restructuring and asset sales. While cash flow from operations is expected to decrease due to the impact of the COVID-19, the Company will restrain growth investment during the FY2023 Strategy period in businesses where demand expansion will be slower than expected, and aggressively invest in mines and M&A that are expected to generate high profits due to copper price hike. In addition, the Company will ensure to invest in upgradings to minimize opportunity cost due to problems with aging facilities, thereby securing the foundation of profitability and leading to future growth. In order to continue making these investments, on February 5, 2021, the Company raised ¥100 billion through a hybrid loan to strengthen its financial position.

(3) Shareholder return policy

The Company recognizes that the return of profits to its shareholders is one of the most important management issues. It is the Company's basic policy to provide a stable and continuous return to its shareholders while making decisions about shareholder return based on a comprehensive assessment of factors across its management, which include earnings for the period, internal reserves, and financial standing. The amounts of dividends will be determined by taking into consideration the funds required for investments, which includes "optimization of business portfolio", "relentless pursuit of enhancing competitiveness", and "creation of new products and businesses" as stated in the Group-wide Policy, as well as future business outlook, financial standing, etc. Regarding share buybacks, the Company will implement them expeditiously as additional shareholder returns, and improve capital efficiency.

The Company planned to pay out an annual dividend of ¥80 per share during the period of FY2023 Strategy. However, due to the impact of the COVID-19, cash flows from operations during the same period are expected to be much lower than the initial forecast. Under these circumstances, the Company while placing an emphasis on stability and continuity with regard to dividends, will set the minimum amount of dividends per share during the period of FY2023 Strategy at ¥50 based on the level of cash flows from operations that the Company has assumed can be generated on a stable basis. By accelerating the sale of assets, among others, and making expeditious allotments of funds, including share buybacks and additional dividends , the Company aims to return profits to its shareholders at the same level as the total amount of dividends initially planned during the period of FY2023 Strategy.

1. Optimization of business portfolio (See the attachment)
   The Electronic materials & components business consists of multiple businesses with different profitability and growth potential. Therefore, the business portfolio was positioned as "medium" in terms of both profitability and growth potential as of March 25, 2020 when the FY2023 Strategy was released. In line with this revision, the Company has subdivided the Electronic materials & components business and clarified its positioning in the business portfolio by indicating the profitability and growth potential of each business. Going forward, the Company will manage each business depending on such positioning.

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1. Targets for contributing to a sustainable society (See the attachment)
   Based on the current and future outlook of the business environment, the Company has revised the numerical targets for contribution to a sustainable society as follows.

i) Sales volume of copper materials for new HV/EV

Target until the end of FY2023: 1,200t (1,000t before the revision)

(Reason for revision: Change in the market trends)

1. Sales volume of next-generation vehicles and environmentally friendly products Target until the end of FY2023: ¥5.6 billion (¥20.3 billion before the revision) (Reason for revision: Change in net sales forecasts)
2. Annual total power generation of renewable energy

Target until the end of FY2031: 533GWh

(Target until the end of FY2026: 550GWh before the revision)

(Reasons for revision: Changed the target year, and changed the definition to the generation volume of each business multiplied by the Company's ownership share)

1. DX strategy (MMDX: Mitsubishi Material Digital Business Transformation)
   As part of the DX strategy, the Company established the Digital Transformation Management Office in April 2020. In order to further specify the measures set forth in the FY2023 Strategy, in FY2021, the Company selected DX themes and studied the details for implementing the measures. As a result, 21 DX themes were selected including "Review the entire business process with a focus on 'get closer to customers'", "Create a foundation for catching up to competitors' efforts and winning on a global scale" and "Strengthen the management foundation by upgrading manufacturing excellence such as safety and security, enhancing business management and data utilization, and promoting business efficiency". The Company also developed a MMDX action plan for 6 years from FY2021 to FY2026.
   Moreover, the Company held workshops to improve digital mind/literacy and train DX professionals in order to strengthen the base of DX professionals.
   Based on these efforts, the Company has clarified the key perspectives, implementation themes, and master plan of its digitalization strategy, "MMDX", in this review of the FY2023 Strategy. The details are shown in the attachment. The Company aims to promote MMDX with a sense of urgency that this is the only period to catch and surpass its peers in the competitive market.

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1. Financial target and investment amount

FY2023 financial targets and investment amount, which were reviewed and revised in consideration of the recent

business environment and business performance trends, are as follows.
1) Financial figures (Consolidated)													(Unit: billion yen)
								FY2020			FY2021			FY2023 Targets
										Original			Revised
								Results			Results
												Targets			Targets
	ROIC				3.8%	3.8%			6.0%		4.0%
	ROA				2.6%	2.3%			4.0%		2.0%
	ROE				-12.8%	4.6%			7.0%		6.0%
				Sales		1,516.1	1,485.1		1,530.0		1,410.0
		PL		Sales		857.3	795.1		650.0		600.0
				(ex. metal cost)
				Operating profit		37.9		26.5			58.0		29.0
		PL
			Ordinary profit		49.6		44.5			75.0		38.0
				Total asset		1,904.0	2,035.5		2,040.0		1,820.0
		BS		Net interest-bearing		413.1	476.3		510.0		360.0
			debt
				Equity		506.7	545.2		630.0		560.0
	Net D/E ratio				0.8 times		0.9 times		1.0 times			1.0 times
						or less					or less
				Exchange rate			109 yen/US$		106 yen/US$		110 yen/US$			110 yen/US$
		Assumption
				121 yen/euro		124 yen/euro		125 yen/euro			130 yen/euro
				Copper price				266￠ /1b		312￠ /lb		290￠ /1b				330￠ /lb
2) Total investment amount for the period of FY2023 Strategy (Consolidated)	(Unit: billion yen)
								Original Plan			Revised Plan
			Growth Strategy investment					190						195
			Maintenance and upgrading					170						160
				investment
			Investment amount					360						355

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2. Optimization of business portfolio

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