Mitsubishi Materials : Top Message (pp. 6~17)

[Top Message]

Value Creation and		About the Mitsubishi			Strengthening the		Financial Data/
Top Message	Business Strategies	Corporate Strategies	Governance
Performance	Materials Group	Foundation	Corporate Data

From the FY2023 Medium-term Management Strategy to Beyond

Mitsubishi Materials formulated a Medium-term Management	2050 is to contribute to building a prosperous society, recycling-
Strategy (FY2023 Strategy) for the three years from fiscal 2021,	oriented society, and decarbonized society.
and that was published in March 2020. Fiscal 2022 is the second	The group-wide policy is made up of "Optimization of
year of the FY2023 Strategy.	business portfolio," "Comprehensive efforts to increase
The FY2023 Strategy stipulates that we will aim to create both	business competitiveness," and "Creation of new products
social and economic values by resolving social issues through	and businesses," and we formulated individual business and
our business activities under the corporate philosophy of "For	corporate strategies in line with those.
People, Society and the Earth" and that our mission for 2030 to
	Overview of FY2023 Strategy
Figure 1

Corporate Philosophy

Vision

Mission

For People, Society and the Earth

We will become the leading business group committed to creating a sustainable society through materials innovation, with use of our unique and distinctive technologies, for People, Society and the Earth

[Create both social and economic values]

Contribute to build a prosperous society by providing nonferrous metal materials, predominantly copper, and high value-added functional materials and products.

Contribute to build a recycling-oriented society by providing recyclable products and advanced technology-based waste recycling.

Contribute to build a decarbonized society by developing and promoting the use of renewable energies such as geothermal energy, and ensuring to consider the reduction of environmental impact in manufacturing.

Mitsubishi Materials Corporation Chief Executive Officer

Naoki Ono

	1)	Optimization of business portfolio
Group-wide Policy
2)	Comprehensive efforts to increase business competitiveness
	Materiality (related to SCQDE)
	3)	Creation of new products and businesses

Long-term business goals

Advanced Products Company :

issues

Stable supply of

Creation of a recycling-

Long-term strategy

Global First Supplier

product/material

oriented society

Create new businesses and products through the sophistication and integration of

social

[Q,D]

[C]

our core competencies

Accelerate marketing activities to replicate successful practice

Metalworking Solutions Company :

Solving

Dealing with

Environment

climate change

protection technologies

Top 3 supplier in strategic markets

[C]

[C]

StrategyManagementterm-Medium

Provide high-efficiency products with advanced technology

coreandbasemanagementtheStrengthening

Metals Company :

Leader in environmentally-friendly mining & smelting business

Workplace safety

Stable supply and recycling of nonferrous metal materials, predominantly copper

Governance

Business Strategies

and hygiene

Cement Company :

[C]

[S]

Leader in the domestic and international cement industry with

advanced environmental technologies

Responsibility

Secure domestic advantage and growth in overseas markets

Development of

in value chain

Environment & Energy Business Company :

diverse talents

[Q,D]

Driving force of resource-recycling systems

Leading company in geothermal development

Solving the problem of urban waste and expanding the renewable energy business

Stakeholder

Digital

communication

transformation

Corporate strategies

R&D and Marketing Strategy

Manufacturing excellence strategy

Quality management strategy Digital Transformation strategy

Human resources strategy

Governance and organizations for supporting management strategy and ensuring business sustainability

Corporate governance

Targeting organization and corporate culture (Group governance)

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MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021

MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021

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[Top Message]

Value Creation and		About the Mitsubishi			Strengthening the		Financial Data/
Top Message	Business Strategies	Corporate Strategies	Governance
Performance	Materials Group	Foundation	Corporate Data

It goes without saying that fiscal 2021 was greatly impacted by the COVID-19 pandemic. While there is hope for an end as vaccinations progress and herd immunity is gained, there is no room to be complacent as we face factors such as the appearance of variants. The Group was greatly affected by a change in the business environment-a major decline in demand especially in the automobile industry-mainly in the first half of the fiscal year.

We have worked to continue operations with thorough measures to prevent the spread of infections at manufacturing worksites. At our offices, meanwhile, we have been promoting working remotely from the early stages of the pandemic. Depending on the situation, such as being under a state of emergency, we control the percentage of employees coming to offices from 10% to 50% or less at the most.

Through these efforts, we believe that we are able to contribute to our mission of building a "prosperous society" and "recycling- oriented society" by supplying materials and products that meet

Uncertainty about the future is increasing, and we are said to be in an age of VUCA (volatility, uncertainty, complexity and ambiguity), making it difficult to predict the future. In such a situation, the key to the company's survival will lie in the ability of the organization to formulate certain hypotheses, verify them, and change its approach as needed in a timely manner.

I, myself, am of the view now that the economy will be blocked as the movement of people and goods will be restrained while information travels around the world. And I believe that the impact of the pandemic and global attempts to reduce CO2 emissions will be drivers for that.

What is important is not whether the situation will turn out as we foresee it, rather, to be prepared to deal with such a situation and at the same time have a backup plan in place.

This entails preparing a plan A and plan B and being able to switch to and apply the appropriate plan quickly according to the situation. I believe that ability of the organization to act promptly and resolutely is imperative.

The Group has started enhancing governance with the following three points as issues to improve on.

• Lack of communication in terms of both quantity and quality

• Fragile compliance framework and awareness ƒ Insufficient resource allocation

This is done with the opportunity presented by the quality issues that occurred in fiscal 2018.

The slogan SCQDE* was established to define the priority of business decisions, and we are putting efforts into it being thoroughly implemented and promoted.

*SCQDE: Order of priority in business decisions at the Group

S: Safety & Health

1. Compliance & Environment

1. Quality

1. Delivery
2. Earnings (reasonable profit)

For our Group in the manufacturing industry, unrelenting reform in manufacturing is indispensable. Reformation of manufacturing has at its core:

• Factory vision (drill down of issues and measures per factory linked to business strategy, common language of dialog with the factory)
• Manufacturing management framework (extracting issues to improve on by factory self- diagnosis)
• Process enhancement (automation, image analysis and data visualization by applying digitalization technology)

And it is a continuation of efforts to "improve manufacturing capabilities," "make manufacturing capabilities specialized," and "tackle the lack of knowledge and skills due to stagnation of technology transfer." (Second year of three-year plan)

demand and by continuously accepting and processing various types of waste.

In terms of the financial plan, while there was recovery in demand from the third quarter, consolidated operating profit was down approximately 30% over the previous fiscal year (fiscal 2020). We thus had to revise the financial plan in the FY2023 Strategy.

On the other hand, there is no need to change our mission for 2030 to 2050 due to the current situation, and we will continue to aim to contribute to building a "prosperous society," "recycling- oriented society," and "decarbonized society." In particular, the importance of contribution to building a "decarbonized society" is becoming greater due to the Japanese government declaring in October 2020 that the country will aim to be carbon neutral.

Figure 2 The path of reforms (overview)

With such ideas as a base, we are proceeding with the five reforms below that need to be worked on now.

[Five Reforms]

1. Reformation of the business structure (optimization of the business portfolio)
2. Reformation of manufacturing (factory vision / management framework / process enhancement)
3. Reformation of the HR system (Next Generation leadership talent development/Job-based HR system)
4. Digital Transformation (DX)
5. Corporate Transformation (CX)

We became a company with a Nomination Committee in fiscal 2020, and in order to strengthen corporate governance and improve the internal governance system, we have established the following six items as the "organizational culture to aim for" and started reforming the organizational culture.

[Targeting organization and corporate culture]

1.	Organization with good and healthy
	communication where employees have
	unrestricted communication
2.	Organization capable of autonomously solving
	issues
3.	Organization that adequately shares the
	understanding of its business
4.	Organization that makes prompt and resolute
	decisions
5.	Organization that manages its business with the
	awareness of the differences between product-
	type and process-type businesses
6.	Organization that aims for thorough digitalization

Maintaining and improving market competitiveness even in an increasingly complex business environment while provocatively incorporating new ways of working and values as well as outside viewpoints and human recourses is a pressing issue, and I believe that it is time to move toward with new ways of working that break away from conventional mechanisms, even in the HR system.

With raising of the mandatory retirement age, we modified the HR system for non-union employees reaching age 60 on or after April 2021 to be centered on duties rather than job qualification as it was up to now. In the future, we will consider expanding the concept of this duties-centered HR system to non-union employees under 60 as well. It goes without saying that large aspects of the organizational and corporate culture are fostered through the process of a human resources strategy that involves changes in awareness and behavior, and they are very important elements in proceeding with corporate transformation, which I will cover later. We need to develop human resources who are willing to develop their own careers and grow with the company, and who can think about their own careers autonomously.

Up to now we have basically deployed and developed internal talents with potential to positions that are needed and made up for any lack of experience. However, expert knowledge and

	n First year of governance à Improvement on three issues
2018	Lack of communication in terms of both quantity and quality ' Fragile compliance framework and awareness ƒ Insufficient resource allocation
n Thorough implementation of SCQDE (order of priority in business decisions)

(SCQDE: Safety & Health/Compliance & Environment/Quality/Delivery/Earnings)

In light of these efforts, we formulated the aforementioned FY2023 Strategy.

speedy implementation of measures are increasingly demanded for some positions, and there are increased concerns that applying just internal human resources will result in delays. We are thus promoting the use of mid-career talent from outside

[Corporate governance]

• Migration to a company with a Nomination Committee 1. Goals

2019			Quicker decision-making
		' Enhanced of Board of Directors supervisory functions
			ƒ Improved transparency and fairness of management
	2.	Clarification of CEO nomination process
	3.	Design of management remuneration system
		n Start of Medium-Term Management Strategy
2020		1.	Mission
	2.	Group-wide Policy
		3.	Long-Term Business Goals/Strategy
2021		n 150th anniversary

[Strengthening Group Governance]

• Targeting organization and corporate culture
• 1. Organization with good and healthy communication where employees have unrestricted communication
  2. Organization capable of autonomously solving issues
  3. Organization that adequately shares the understanding of its business
  4. Organization that makes prompt and resolute decisions
  5. Organization that manages its business with the awareness of the differences between product-type and process-type businesses
  6. Organization that aims for thorough digitalization
• Five reform
• 1. Reformation of the business structure (optimization of the business portfolio)
  2. Reformation of manufacturing (factory vision / management framework / process enhancement)
  3. Reformation of the HR system (Next Generation leadership talent development/Job-based HR system)
  4. Digital Transformation (DX)
  5. Corporate Transformation (CX)

We are implementing these strategies, promoting realization of the aforementioned six items of the targeting organization and corporate culture, and working on five reforms in order to evolve into a corporate group with ability of the organization to act promptly and resolutely.

Regarding reformation of the business structure (optimization of the business portfolio), we decided to indicate the current position of each business in the FY2023 Strategy on the two axes of profitability and growth potential. But what is important is not where each business is positioned, but to quickly implement the necessary and appropriate measures and actions to maintain or change that position. By indicating where each business is positioned, we need to recognize clearly the measures that each business should implement.

the company from the perspective of incorporating diverse viewpoints.

Meanwhile, the systematic development of the kind of leadership talent who will be needed in the future is essential for the continuous improvement of our value as a company. Such comprehensive efforts are what reformation of the HR system is.

We are going forward with that unwavering determination digital transformation (DX) under a strong sense of urgency that now is our last chance to catch up and take the lead in that. In April 2020 we set up the DX Management Office and invited external talent to act as our Chief Digital Officer (CDO), and we are studying details on selecting DX themes and achieving measures in order to make the measures presented in the

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MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021

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9

[Top Message]

Value Creation and		About the Mitsubishi			Strengthening the		Financial Data/
Top Message	Business Strategies	Corporate Strategies	Governance
Performance	Materials Group	Foundation	Corporate Data

FY2023 Strategy more concrete. We selected 21 DX themes with

the main points of...

n Review the entire business process with a focus

on "getting closer to customers"

n Create a foundation for catching up to

competitors and winning on a global scale

n Strengthen the management foundation through

enhanced safe and secure manufacturing

And it is reform to the optimal management structure in order to achieve that.

With the following objectives in mind, we are considering an optimal management structure that will contribute to improving the corporate value of the Group as a whole.

Objectives of CX

1. Clarification of division of duties between head

office, functional divisions, and business divisions

Optimization of business portfolio

Fiscal 2021 movements in optimization of the business portfolio are as follows.

Figure 4 Reformation of business structure

Acquisition of Luvata	Establishment of Technical Centers	Launch of E-Scrap Sampling Center in the Netherlands	Joint development
Absorption-type merger of	Making Mitsubishi Hitachi Tools as a wholly
Mitsubishi Shindoh	owned subsidiary	Establishment of Mining & Metallurgy Laboratories	of LiB recycling
technology

C : Stands for "in-house company"  : Long-term Goals of business

• Started operations of Wasabizawa Geothermal Power Plant
• Started construction of geothermal and water power plants

excellence activities, enhanced business

management and data utilization, and increased

business efficiency.

And we formulated an action plan for the six-year period from fiscal 2021 to 2026.

Moreover, we are also holding workshops for improving digital mindsets and digital literacy and developing DX human resource in order to strengthen the foundations of DX human resources.

2.	Speedy and flexible business management
	according to the business environment and
	business characteristics
3.	Strengthening of governance functions by
	pursuing a balance in centrifugal and centripetal
	forces between head office, functional divisions,
	and business divisions

Advanced Products C			Metalworking Solutions			Metals Business C
			Business C
				Top 3 supplier in strategic				Leader in
Global First Supplier					environmentally-friendly
			markets
						mining & smelting business
Copper & copper	Electronic materials
(xEV and
		5	Cemented carbide			6	Mining & smelting
alloy	semiconductor-

related materials)

Cement Business C

Leader in domestic and

international cement industry with

advanced environmental

technologies

1 Cement

Environment & Energy	3
Business C

• Driving force of resource-recycling systems
• Leading company in geothermal development

Environmental		Renewable
4
recycling	energy

Structural Improvements

• Reform of business structure improvement
• Improvement of profitability
• Acceleration of international business

2 Sintered parts

7 Aluminum business / Electronic materials & components business (polycrystalline silicon and electronic devices)

DX is deeply related to other reform items, and it is the foundation that holds our Group transformation as a whole. It has a position as an important initiative at the core of our management strategies even following the current FY2023 Strategy.

Corporate transformation (CX) is a concept where we aim to combine...

n Headquarters (head office) in charge of strategy

4.	Fostering awareness of the role of indirect
	operations and their contribution to increasing
	corporate value, as well as cost consciousness
5.	Changing mindset and organizational culture to
	enhance corporate value by realizing our mission
	through a strong awareness of one's roles and
	responsibility for the business
6. Fostering of human resources for management

1. Signed agreement concerning integration of Cement Business and related businesses with Ube Industries, Ltd.
2. • In April 2022, a new integrated company (Mitsubishi UBE Cement Corporation) will be established.
3. December 4, 2020, transfer of shares of Diamet Corporation completed.
4. July 1, 2021, transfer of shares of DIA CONSULTANTS CO., Ltd., which provides consulting in civil engineering geology, etc., completed.

1. September 2020 New Energy Fujimino Co., Ltd. commenced operations (biogasification of food waste).
2. December 2020 Investment in Masan High-Tech Materials Corporation
3. February 2021 Investment in 30% stake of Mantoverde copper mine

Mitsubishi Aluminum Co., Ltd. Group is implementing measures for structural improvements (e.g. "increasing cost competitiveness," "Business selection and concentration").

7 January 2021	Transfer of shares of a subsidiary in China completed.
April 2021	Transfer of shares of TACHIBANA METAL MFG Co., Ltd. completed.

n Functional divisions that support efficiency

improvement and advancement

n Strong business divisions capable of

implementing autonomous management

The following table summarizes initiatives for fiscal 2022 as their relationship with group-wide policy and the six items of the organizational culture to aim for.

In cement business, we are making preparations as follows in line with the already announced agreement on integrating our cement business with Ube Industries, Ltd.

n Establishment of integration preparation company

as of April 14, 2021

n Approval on June 24, 2021 by our General

Meeting of Shareholders on absorption-type

• Optimization of business portfolio for electronic materials & components business
• Promotion of aluminum business restructuring and reorganization
• Preparation for start of new integrated company for cement business

Figure 3 Policy on fiscal 2022 initiatives (relation with the FY2023 Strategy)

Group-wide policy			Efforts up to now			Policy on fiscal 2022 initiatives
Optimization of business		•Conclusion of cement business integration agreement	•Optimization of electronic materials & components business portfolio
portfolio		•Enhancing function for searching for new business (New Business Development Dept.)
		•Restructuring and reorganization of profit-improving business	•Promotion of DX (DX Promotion Dept, System Strategy Dept, external human resources)
' Comprehensive efforts		•Investment in expanding tungsten business	•Promotion of promoting operational efficiency (Business Process Innovation Dept.)
to increase business		•Investment in Mantoverde copper mine	•Reformation of the HR system (Next Generation leadership talent development/Job-based HR system)
competitiveness		•Start of Appi Geothermal Power Station and food waste biogasification	•Continuation of manufacturing capabilities improvement* (factory vision, manufacturing management
					framework, process enhancement)
ƒ Creation of new products		•Utilization of corporate venture capital	•(Enhancing function for searching for new business)
and businesses		•MMC-NIMS Center of Excellence for Materials Informatics Research	•(DX promotion)
Targeting organization and corporate culture	Efforts up to now			Policy on fiscal 2022 initiatives
Organization with good and healthy	•Improvement of communication in all levels and	•Promotion of direct access in various levels, not just top-down dependent on organizational hierarchy
communication where employee has
unrestricted communication		opportunities
' Organization capable of autonomously	•Formation and operation of governance deliberation	•Strengthening of governance (prevention of illicit dealings and anti-trust violations)*
solving issues		system and improvement by enhanced auditing	(CX)		•Clarification of division of duties between functional divisions and business divisions
ƒ Organization that adequately shares	•Optimization of business portfolio	Corporate Transformation		•Division and deepening of management mesh
the understanding of its business	(Reduction of business domains)	Committee
" Organization that makes prompt and	•Transfer of authority to execution with the migration to a	•Transfer of authority to business divisions
resolute decisions		company with a Nomination Committee
Organization that manages its business	•Focused management in R&D, manufacturing excellence,
with the awareness of the differences	•Business management with special qualities per business division
between product-type and process-type	and human resources exchange.
businesses
† Organization that aims for thorough	•Detailed planning and implementation by DX	•Second year of MMDX
digitization		Management Office	•Enhancement of security against cyber attacks
						*Company-wide critical risks in risk management

company split agreement between the Company

and the integration preparation company

n Announcement on July 7, 2021 of the name and

representative of the new, integrated company

(Mitsubishi UBE Cement Corporation)

In sintered parts business where structural improvements are needed, a transfer of shares was completed on December 4, 2020 and restart under new ownership was achieved. And in aluminum business, Mitsubishi Aluminum Co., Ltd. took on structural improvements centered on strengthening cost competitiveness and selection and consolidation of businesses/ products, and it conducted measures such as relocating the head office and transferring several overseas subsidiaries, leading to a certain level of improvement in earnings in the fiscal year ended March 31, 2021.

In fiscal 2022 we are proceeding with optimization of the business portfolio with priority placed on the following items.

• Restoring profitability in copper & copper alloy and cemented carbide businesses
• Enhancing the search for new business

While copper & copper alloy and cemented carbide businesses are positioned in the portfolio as businesses in which to maintain and improve high profitability, performance was sluggish in fiscal 2021. We have thus formed a task force this fiscal year to work to restore profitability as soon as possible, and we are working on the issues in a concentrated manner.

Electronic materials business is a composite business composed of multiple businesses and products, and the entire business was initially positioned in the FY2023 Strategy to

be integrated. In fiscal 2022, we will divide each business in electronic materials business and clarify the position of each from perspectives such as businesses that ownership should be taken for as well as development resources, relevance to the Company's technology, profitability, and growth potential. And we will take actions according to the position.

Specifically, our policy is to maintain growth in business for semiconductor manufacturing equipment and semiconductor- related products by strengthening investment, and we will work to improve the profit structure of polycrystalline silicon business and electronic devices business.

And for xEV components where future growth is expected, the business, development, and manufacturing divisions are deploying collaborative efforts in an aim to build a solid business model from development to mass production.

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MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021 11

[Top Message]

Figure 5 Status of business portfolio optimization

[Characteristics of businesses that the company should take	[Building business portfolio]
ownership of]
 Businesses that are consistent with the Group's vision and mission	 Profitability and growth potential determine the business direction
 Businesses that are governable by the Group	 Profitability is measured by ROIC (spread)
 Businesses that are capable of earning a leadership role in a specific region or the world	 Growth potential is measured by EBITDA growth rate, etc.

• Businesses that can deliver stable returns over capital costs on a medium- to long-term basis

High			High growth potential but requires careful business decisions	Maintain and grow a healthy profit with enhanced
			for the next step	investments
			New business	Copper & copper alloy
			Cemented carbide
				Semiconductor-related
			 Next-generation electric vehicle materials	(Electronic materials & components business)
Potential
		and components
		(Electronic materials & components business)
				Mining & smelting
Growth				Environmental recycling
		Polycrystalline silicon	Renewable energy
		(Electronic materials & components business)
			Electronic devices
			(Electronic materials & components business)	Cement
			Aluminum Business
			Improve profit structure while considering M&A and business	Maintain and grow profitability through operational efficiency
Low			withdrawal	and M&A
Low	Profitability (ROIC)	High

Value Creation and		About the Mitsubishi			Strengthening the		Financial Data/
Top Message	Business Strategies	Corporate Strategies	Governance
Performance	Materials Group	Foundation	Corporate Data

Figure 6 Investment results through "MMC Innovation Investment Limited Partnership"

MMC has established the "MMC Innovation Investment Limited Partnership" in order to develop medium- to long-term technologies of the Group, create innovation through collaboration, and create new value. And MMC has invested in the venture companies with material technologies that is new business candidate as follows.

	Company name	Company's technologies/products	MMC's aim
		Elephantech has manufacturing technology for	MMC has started development of "copper nano ink"
October 2019	Elephantech Inc.	electronic circuit boards by additive manufacturing	with Elephantech as an evaluation partner. MMC will
using inkjet printing of metal nano inks and electroless	aim to develop new copper products for circuit boards
		copper plating.	and get opportunities of its supply.
			In collaborate with EneCoat Technologies, MMC will
		EneCoat Technologies is developing Perovskite Solar	develop technologies that contribute to improving
	EneCoat Technologies	the performance of Perovskite Solar Cells and the
	Cells characterized by high power generation efficiency,
May 2020	peripheral materials etc. necessary for making them
Co., Ltd.	light weight, and flexibility compared to conventional
	lead-free, aiming to get opportunities to supply
		silicon-based solar cells.
		materials when perovskite solar cells become
			widespread.
		CONNEXX SYSTEMS has development and	MMC is developing technology for reusing and
	CONNEXX SYSTEMS	manufacturing technologies for new storage battery,	recycling used in-vehicle LiB. In collaboration with
June 2020	high-powerin-vehicleLithium-ion battery (LiB), and	CONNEXX SYSTEMS, MMC will promote the reuse
Corporation
	next-generation battery that combine LiB and lead-acid	business that is the reuse of collected used in-vehicle
		battery.	LiB for stationary storage battery.
		Nature Architects has unique structure design	By combining MMC's knowledge of non-ferrous metals
September		and other material properties with Nature Architects'
	technologies such as giving strength only to the
Nature Architects inc.	design technology, MMC will promote development
2020	necessary parts and adding the function of absorbing
	of unique products with new added value by additive
		vibration to hard parts.
		manufacturing using our materials.

Comprehensive efforts to increase business competitiveness/Creation of new products and businesses

In fiscal 2021, we invested in Masan High-Tech Materials Corporation (MHT), which deploys tungsten business from its main base of operations in Vietnam. By building a long-term strategic partnership with MHT, we intend to consider launching joint business in tungsten recycling utilizing global bases under the control of MHT and collaborating in the midstream of the tungsten business, including a technical tie-up on the production of high-quality tungsten powder. We intend to accelerate the expansion and growth of our metalworking solutions business through the implementation of various measures, including consideration of collaboration with MHT.

In February of 2021, we completed acquisition of a 30% stake in Mantoverde copper mine in Chile, thereby officially participating in the project. We plan to start receiving copper concentrate from 2023. Metals business has "creation of a sustainable raw material portfolio consisting of clean copper concentrate and E-Scrap" as a long-term strategy, and this project enabling us to stably secure high-quality copper concentrate with few impurities is a major step forward.

In environment and energy business, we started a business to receive food waste and perform biogasification to generate electricity and to convert residue from that into raw material for cement. This leads to contribution to building a recycling-oriented society and decarbonized society. Although quickly responding to the changing composition of food waste generation due to the impact of COVID-19 is an issue, we intend to accumulate

knowledge on operation so that it can lead to future expansion. There have been two movements in efforts for creation of new products and new businesses:

• Investment through corporate venture fund "MMC Innovation Investment Limited Partnership"
• Establishment of MMC-NIMS Center of Excellence for Materials Informatics Research

The corporate venture fund was established in 2019, and it made one investment in fiscal 2020 and three in fiscal 2021. All are movements aiming for innovation through collaboration making use of the Company's strengths.

MMC-NIMS Center of Excellence for Materials Informatics Research merges the informatics-driven materials development foundations of the National Institute for Materials Science (NIMS) with various elements such as experimental data, analytical models, and empirical rules accumulated by MMC in materials development. With that, it plans to build informatics- driven materials development systems which will predict the performance and life of practical materials to be manufactured using a combination of multiple materials and processes by 2025. By promoting R&D and enhancement of production processes that incorporate innovative technologies such

as IoT, AI and robotics, we intend to achieve efficient and speedy product development in our focus areas of IoT, AI, next-generation vehicles, urban mines, clean energy, and decarbonization in order to lead to realizing our mission.

Revision of the FY2023 Strategy

While there is no change to our medium to long-term mission, performance in the first year of FY2023 Strategy was much poorer than initially anticipated due to factors such as the impact of COVID-19. We expect performance to gradually recover in line with situations such as vaccines becoming more widely available and herd immunity being gained, and in fiscal 2023 we expect advanced products and metalworking solutions business to recover to pre-COVID levels. However, we have to consider impacts such as postponement of growth investments due to the expected slowdown in demand recovery, transition of cement business to an equity-method affiliate, and decline in mining dividends from the metals business. We thus expect results for fiscal 2023, the final year of the FY2023 Strategy, to be lower than initial targets. In light of this, we released a revision to the FY2023 Strategy in May 2021 centering mainly on the financial plan.

1) Financial plan: Financial targets

The achievement of fiscal 2023 targets for ROIC, EBITDA, etc. announced in March 2020 is expected to be delayed until fiscal 2024 or later. Therefore, the Company has positioned the FY2023 Strategy period as a period to solidify the foundation for efficiency and profitability, which will lead to a firm growth path in fiscal 2024 and beyond.

The Company-wide financial targets for fiscal 2023 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 1.0 times or less (1.0 times or less).

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MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021 13

[Top Message]

Value Creation and		About the Mitsubishi			Strengthening the		Financial Data/
Top Message	Business Strategies	Corporate Strategies	Governance
Performance	Materials Group	Foundation	Corporate Data

Figure 7 Revisions to FY2023 Strategy (financial indicators)

Changes in ROIC, etc. of main businesses (compared with FY2018-2020 averages)

2) Financial plan: Resource allocation

As for investment, the Company has factored in growth investments and other investments, which had not yet been

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

(FY2018-2020 Average)	Metals Business
ROIC		25.0%
	Cemented
		carbide
		8.3%
5%
		Renewable
Copper			energy
		4.3%
& copper
alloy
3.8%	Electronic	Environmental	Invested
	capital
	materials	recycling
	2.5%	1.4%
(FY2023 Target)		Metals Business
ROIC		12.9%
	Cemented
		carbide
		5.3%
5%
		Renewable
Copper			energy
		2.6%
& copper
alloy	Electronic	Environmental	Invested
3.0%	materials	recycling	capital
	4.2%	2.4%

FY2018-2020	FY2023
Average	Target

			The whole	ROIC		4.2%	4.0%
			ROA		3.1%	2.0%
			MMC group
			ROE		-2.0%	6.0%
			FY2018-2020		FY2023	By business	FY2018-2020	FY2023
			Average		Target	division	Average	Target
				KGI
Advanced	Copper &		3.8%		3.0%	EBITDA	14.4	14.0
Copper alloy			billion yen	billion yen
Products
Electronic							4.1	11.0
Business		2.5%		4.2%	EBITDA
materials			billion yen	billion yen
Metalworking	Cemented		8.3%		5.3%	EBITDA	28.1	22.0
Solutions
Carbide			billion yen	billion yen
Business	ROIC
Metals Business			25.0%		12.9%	ROA *	8.9%	7.2%
Environment	Environmental		1.4%		2.4%	ROA	2.0%	2.8%
Recycling
& Energy
Renewable
Business		4.3%		2.6%	ROA	5.6%	3.3%
energy
* Calculated by excluding the price of bullion

determined at the time of the announcement of the FY2023 Strategy in March 2020, while having postponed some investments, mainly in advanced products and metalworking solutions businesses. For the period of the FY2023 Strategy after revision, total investment is anticipated 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 those investments 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 COVID-19, the Company will restrain growth investment during the FY2023 Strategy period in businesses where demand expansion will be slower than expected. Instead, it will aggressively invest in mines, which are expected to generate high profits due to copper price hikes, and in M&A.

In addition, the Company sees minimizing lost opportunities due to problems with aging facilities as imperative for securing the foundation of profitability, so we will ensure investments

period of the FY2023 Strategy.

ESG initiatives

1) Efforts in dealing with climate change

The company announced in 2020 our support for recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and that we will join the TCFD Consortium. We announced in March 2021 that the Group as a whole will aim to reduce greenhouse gas (GHG) emissions by 17% or more over fiscal 2014 levels by fiscal 2031. We expect GHG emissions reductions in cement business, which has large emissions, to be only about 15%, but we set targets from 20% to more than 30% for businesses such as advanced products and metalworking solutions. Additionally, with a final goal of becoming a carbon neutral company by 2050, we intend to further raise the bar over fiscal 2031 targets.

In cement business, we are working on the development of technology to separate and recover CO2 generated at factories and chemically react it with hydrogen to synthesize methane and

Results of revisions to financial indicators such as ROIC, etc. of main businesses

are made in upgrading, thereby leading to future growth. While continuing to make those investments, the Company raised

other compounds, which can then be reused as heat energy for cement production.

Main Business	ROIC	EBITDA/ROA
		FY2023 Original Target	FY2023 Revised Target	FY2023 Original Target	FY2023 Revised Target
Advanced Products	Copper & Copper alloy	4.0%	3.0%	20.0 billion yen	14.0 billion yen
Business	Electronic materials	6.0%	4.2%	16.0 billion yen	11.0 billion yen
Metalworking	Cemented Carbide	7.0%	5.3%	39.0 billion yen	22.0 billion yen
Solutions Business
Metals Business		10.5%	12.9%	6.5%	7.2%
Environment &	Environmental Recycling	4.0%	2.4%	6.0%	2.8%
Energy Business	Renewable energy	4.0%	2.6%	5.5%	3.3%

•Solidify foundations of efficiency and profitability in FY2023 Strategy period, leading to a sure track to growth.

• Aim to promptly meet FY2023 Strategy goals in or after fiscal 2024.

¥100 billion in February 2021 through a hybrid loan in order to strengthen and enhance 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 goals. 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

The Group owns geothermal, hydroelectric, and solar generation facilities in Japan with which we are deploying renewable energy business. Measures to promote geothermal power generation are expected in the future.

2) Integration of contributions to realizing a recycling-oriented

society and contributions to realizing a decarbonized society

Our Group's broad range of recycling-based business contribute

to our mission of building a recycling-oriented society. In

Figure 8 Revisions to FY2023 Strategy (resource allocation)

Investment Policy

• Cumulative cash flows from FY2021 to 2023 (Consolidated)

Cash in

(Unit: billion yen)

Cash out

(Unit: billion yen)

Original Plan

Revised Plan

Increases

Original Plan

Revised Plan

Increases

& decrease

& decrease

Operating CF

280

240

-40

Investment for growth

190

195

5

Others

60

145 *1

85

Investing CF

Investment for maintenance

170

160

-10

and upgrading

Total

340

385

45

Subtotal

360

355

-5

*1 Business restructuring and sales of strategic holdings

Financing CF

Dividends*2

46

42

-4

Total

406

397

-9

*2 Dividends paid, share buybacks, and cash dividends paid to non-controlling shareholders

• Cumulative investment plan from FY2021 to 2023 (Consolidated)

(Unit: billion yen)

Advanced Products

Metalworking Solutions

Metals

Cement

Environment & Energy

Others

Original plan

82

107

74

30

15

52

Revised Plan

78

81

93

47

18

38

Increases and decreases

-4

-26

19

17

3

-14

Breakdown of

• Increasing investment

• Increasing growth

• Decreasing capital

• Decrease of investment

• Decrease of investment

• Increasing investment

in business integration

major increases and

for growth

• Increasing investment

investment for home

expenditure in the

for growth

to mines

appliance recycling and

decreases

• Increasing M&A

in environmental

Aluminum business

renewable energy

measures (US)

• The Company will set the minimum annual dividend amount for the period of FY2023 Strategy at 50 yen per share

Shareholder

• By accelerating the sale of assets, among others, and making expeditious allocations of funds including share buybacks and additional dividends, the

return policy

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.

Original Plan

Revised Plan

Dividends

80yen/share

50yen/share

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," "comprehensive efforts to increase business competitiveness," and "creation of new products and businesses" as stated in the Group-wide Policy, as well as future business outlook, consolidated and non-consolidated 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 the FY2023 Strategy. However, net income after adjustment for special factors such as cash flows from operations during the same period and asset sales is 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, changed the minimum amount of annual dividends per share during the period of the FY2023 Strategy to ¥50 based on the level of cash flows from operations that the Company has assumed can be generated on a stable basis. And by accelerating measures such as sale of assets and making expeditious allotments of

particular, our approach to urban trash processing contributes to

the reduction of environmental impact as a measure closely tied

to people's lives.

In the future, we hope to contribute to building a decarbonized

society throughout the entire life cycle in recycling-based

business as well by promoting the reduction of CO2 emissions in

the entire waste treatment process.

We once operated many coal mines and metal mines in

Japan. Most of those were underground mines, and wooden

supports were necessary materials. We thus came to own more

than 14,000 hectares of forest. By managing those appropriately

even today, we maintain the public interest functions of forests,

such as the absorption and fixation of CO2 and the prevention

of erosion. And by ensuring biodiversity, they contribute to

environmental conservation.

14 MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021

MITSUBISHI MATERIALS CORPORATION INTEGRATED REPORT 2021 15