Nippon Steel : (Delayed) Annual Securities Report 202106

Annual Securities Report

The 96th Term (from April 1, 2020 to March 31, 2021)

(ABSTRACT TRANSLATION)

NIPPON STEEL CORPORATION

Editor's notes:

1. Please note that the official text of this document has been prepared in Japanese. The information herein stated is provided only for reference purposes. The company is not responsible for the accuracy of the information. To the extent there is any discrepancy between the English translation and original Japanese version, please refer to the Japanese version.
2. On June 23, 2021, the company filed its Annual Securities Report (Yukashoken Houkokusho) with the Director-General of the Kanto Financial Bureau in Japan.

Contents

Page

I. Overview of the Company ………………………………………………………………………………………..………………1

1. Key Financial Data ………………………………………………………………………………………….………………1
2. History ……………………………………………………………………………………………………….………………4
3. Description of Business ……………………………………………………………………………………….…………….5
4. Subsidiaries and Other Affiliated Entities ………………………………………………………………..….……………7
5. Employees …………………………………………………………………………………………………………….……17

II. Business Overview …………………………………………………………………………………………………………...…18

1. Management Policy, Business Environment, Issues to Be Addressed…………………………………………………..18
2. Business Risks ……………………………………………………………………………………………………………...22
3. Management's Analysis of Financial Position, Operating Results and Cash Flows…………………………………...29
4. Material Business Agreements, etc. ………………………………………………………………………………………39
5. Research and Development Activities……………………………………………………………………………………..41 III. Information about Facilities ………………………………………………………………………………………..…………46

1. Overview of Capital Expenditures ………………………………………………………………………………………..46
2. Major Facilities …………………………………………………………………………………………………………….47
3. Planned Addition, Retirement, and Other Changes of Facilities ………………………………………………………..49 IV. Status of the Reporting Company …………………………………………………………………………………………….50

1. Company's Shares, etc. …………………………………………………………………………………………………….50
2. Acquisition and Disposal of Treasury Stock ……………………………………………………………………………...55
3. Dividend Policy …………………………………………………………………………………………………………….56
4. Corporate Governance, etc. ……………………………………………………………………………………………….57

V. Financial Information …………………………………………………………………………………………………………106

1. Consolidated Financial Statements ……………………………………………………………………………………...106

I. Overview of the Company

1. Key Financial Data

1. Key financial data for the five most recent fiscal years

Fiscal term		International Financial Reporting Standards
	93rd term	94th term	95th term	96th term
Year ended		March 2018	March 2019	March 2020	March 2021
Revenue	(Millions of	5,712,965	6,177,947	5,921,525	4,829,272
Yen)
Business profit (loss)	(Millions of	288,700	336,941	(284,417)	110,046
Yen)
Profit (loss) for the year	(Millions of
attributable to owners of the	180,832	251,169	(431,513)	(32,432)
Yen)
parent
Comprehensive income for the	(Millions of	311,759	85,114	(543,642)	143,233
year	Yen)
Equity attributable to owners of	(Millions of	3,136,991	3,230,788	2,641,618	2,759,996
the parent	Yen)
Total assets	(Millions of	7,756,134	8,049,528	7,444,965	7,573,946
Yen)
Total equity attributable to	(Yen)	3,554.21	3,509.72	2,869.19	2,997.53
owners of the parent per share
Basic earnings (loss) per share	(Yen)	204.87	281.77	(468.74)	(35.22)
Diluted earnings (loss) per share	(Yen)	―	―	―	―
Ratio of equity attributable to
owners of the parent to total	(%)	40.4	40.1	35.5	36.4
assets
Return on equity	(%)	6.0	7.9	(14.7)	(1.2)
Price-earnings ratio	(Times)	11.4	6.9	―	―
Cash flows from operating	(Millions of	485,539	452,341	494,330	403,185
activities	Yen)
Cash flows from investing	(Millions of	(363,170)	(381,805)	(345,627)	(389,035)
activities	Yen)
Cash flows from financing	(Millions of	(104,969)	(42,900)	(14,582)	52,694
activities	Yen)
Cash and cash equivalents at end	(Millions of	142,869	163,176	289,459	359,465
of the year	Yen)
Number of employees		97,996	105,796	106,599	106,226
Figures in brackets represent the
average number of temporary		[18,271]	[20,164]	[19,725]	[18,812]
workers not included in the above
figures

Notes: 1. Starting from the 94th term, the Company's consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards ("IFRS").

1. The number of employees for each term is the number of persons in employment as of March 31 (excluding those seconded from consolidated companies to companies other than consolidated companies, and including those seconded from companies other than consolidated companies to consolidated companies), and does not include part-time or temporary workers.
2. Figures in parentheses are negative.
3. Business profit on consolidated statements of profit or loss indicates the results of sustainable business activities, and is an important measure to compare and evaluate the Company's consolidated performance continuously. It is defined as by deducting cost of sales, selling, general and administrative expenses and other operating expenses from revenue, and adding to it share of profit in investments accounted for using the equity method and other operating income. Other operating income and expenses are composed mainly of dividend income, foreign exchange gains or losses, and losses on disposal of fixed assets.
4. Diluted earnings per share are not presented as there are no potential dilutive shares.
5. The price-earnings ratio for the 95th and 96th terms is not presented as the Company recorded a loss for the year.

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Fiscal term		JGAAP
	92nd term	93rd term
Year ended		March 2017	March 2018
Net sales	(Millions	4,632,890	5,668,663
of Yen)
Ordinary profit	(Millions	174,531	297,541
of Yen)
Profit attributable to owners	(Millions	130,946	195,061
of parent	of Yen)
Comprehensive income	(Millions	217,453	299,598
of Yen)
Net assets	(Millions	3,291,015	3,515,501
of Yen)
Total assets	(Millions	7,261,923	7,526,351
of Yen)
Net assets per share	(Yen)	3,340.21	3,563.80
Earnings per share	(Yen)	147.96	221.00
Diluted earnings per share	(Yen)	―	―
Capital adequacy ratio	(%)	40.6	41.8
Return on equity	(%)	4.6	6.4
Price-earnings ratio	(Times)	17.3	10.6
Cash flows from operating	(Millions	484,288	458,846
activities	of Yen)
Cash flows from investing	(Millions	(343,738)	(353,419)
activities	of Yen)
Cash flows from financing	(Millions	(135,054)	(89,190)
activities	of Yen)
Cash and cash equivalents at	(Millions	91,391	111,779
end of the year	of Yen)
Number of employees		92,309	93,557
Figures in brackets represent
the average number of		[15,720]	[16,361]
temporary workers not
included in the above figures

Notes: 1. The number of employees for each term is the number of persons in employment as of March 31 (excluding those seconded from consolidated companies to companies other than consolidated companies, and including those seconded from companies other than consolidated companies to consolidated companies), and does not include part-time or temporary workers.

1. Figures in parentheses are negative.
2. Diluted earnings per share are not presented as there are no potential dilutive shares.
3. Key financial data for the 93rd term reflect the retrospective application of "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018), etc.

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Note: Amounts presented in this report do not include national or local consumption taxes, in principle. The tax-exclusion method is used in the accounting treatments.

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(2) Key financial data of the reporting company for the five most recent fiscal years

Fiscal term		92nd term	93rd term	94th term	95th term	96th term
Year ended		March 2017	March 2018	March 2019	March 2020	March 2021
Net sales	(Millions of	2,974,224	3,266,686	3,562,226	3,312,949	2,820,992
Yen)
Ordinary profit (loss)	(Millions of	48,132	107,213	112,319	(40,410)	(25,446)
Yen)
Profit (loss) for the year	(Millions of	41,541	118,275	145,319	(455,641)	(42,098)
Yen)
Common stock	(Millions of	419,524	419,524	419,524	419,524	419,524
Yen)
Total number of issued shares	(Thousands	950,321	950,321	950,321	950,321	950,321
	of Shares)
Net assets	(Millions of	1,938,126	2,024,648	2,072,452	1,446,409	1,467,570
Yen)
Total assets	(Millions of	5,085,063	5,194,163	5,462,897	5,009,656	5,253,847
Yen)
Net assets per share	(Yen)	2,192.65	2,290.62	2,247.72	1,568.77	1,591.76
Dividends per share		45	70	80	10	10
(Interim dividends shown in	(Yen)	[―]	[30]	[40]	[10]	[―]
brackets)
Earnings (loss) per share	(Yen)	46.87	133.81	162.79	(494.18)	(45.66)
Diluted earnings per share	(Yen)	―	―	―	―	―
Capital adequacy ratio	(%)	38.1	39.0	37.9	28.9	27.9
Return on equity	(%)	2.2	6.0	7.1	(25.9)	(2.9)
Price-earnings ratio	(Times)	54.7	17.5	12.0	―	―
Dividend payout ratio	(%)	96.0	52.3	49.1	―	―
Number of employees		24,822	25,101	26,570	27,096	29,579
Figures in brackets represent
the average number of		[4,204]	[4,357]	[4,228]	[4,087]	[3,723]
temporary workers not
included in the above figures
Total shareholder return		120.7	113.4	99.4	52.3	97.2
(Comparative indicator:	(%)	[114.7]	[132.9]	[126.2]	[114.2]	[162.3]
TOPIX Total Return Index)
Highest share price	(Yen)	2,912.0	3,132.0	2,527.0	2,081.0	1,954.0
Lowest share price	(Yen)	1,787.5	2,228.0	1,794.0	857.0	798.1

Notes: 1. The number of employees for each term is the number of persons in employment as of March 31 (excluding those seconded to other companies, and including those seconded from other companies), and does not include part-time or temporary workers.

1. Figures in parentheses are negative.
2. Diluted earnings per share are not presented as there are no potential dilutive shares.
3. The Company has applied "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018), etc. from the beginning of the 94th term. Key financial data for the 93rd term reflect the retrospective application of the said accounting standards.
4. The price-earnings ratio and dividend payout ratio for the 95th and 96th term is not presented as the Company recorded a loss for the year.
5. Total shareholder return is the ratio of income (dividends and capital gains) gained from investment in shares divided by the investment amount (share price), which is calculated using the following formula.
   (Share price at the end of each fiscal year + cumulative amount of dividends per share from four fiscal years before the current fiscal year to the respective fiscal year) / share price at the end of the year, five fiscal years before the end of the current fiscal year.
6. Share prices on the First Section of the Tokyo Stock Exchange have been adopted.

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