Tokai Carbon : Q1 FY2024 Earnings Presentation(2MB)

Q1 FY2024

Earnings Presentation

2024/5/10

Table of Contents

Ⅰ Q1 FY2024 Financial Summary

P 3-13

Reference material

P 14-17

Ⅰ

Q1 FY2024

Financial Summary

FY2024 Business Topics (January-March 2024)

• In April, the International Monetary Fund (IMF) revised the outlook for the global economic growth rate for 2024 slightly upward to 3.2%, the same rate as the previous year, mainly due to strong performance in the U.S. and other countries, while also revising the rate downward in Germany and other European countries, seeing that regional differences are evident and the pace of recovery in the macroeconomy is steady and resilient, but also slow. Economic conditions, including interest rate and exchange rate trends, remain uncertain primarily owing to concerns about growing geopolitical risks and the need to control inflation.
• For the first quarter, the Company saw strong performance in carbon black, and sales of fine carbon, where the power semiconductors and memory semiconductor markets had bottomed out, showing a recovery trend. On the other hand, the performance has deteriorated in graphite electrodes, which are still affected by bearish steel market conditions and intensifying competition, and in smelting and lining for aluminum smelters and electronic device industry. As for consolidated results, net sales decreased and operating income decreased significantly. EBITDA, a point of focus in measuring cash-based earning capacity, also declined. EBITDA margin was in the upper 10% range.
• Negative free cash flow (excess outflow) increased YoY, mainly due to decreased earnings resulting from continued investments. There were no significant changes in the net D/E ratio, short and long-term liabilities, and direct/indirect funding structure, and the Company maintained high financial soundness, liquidity, and sufficient capacity for investment.

Summary of Consolidated Results

• Consolidated results saw YoY decreases in net sales and operating income
• Net sales ¥82.1 b (-5.0%) , operating income ¥3.4 b (-69.6%) , ROS 4.2% (-9.1%points)
• EBITDA ¥13.6 b (-31.9%) , EBITDA margin 16.7% (-6.5%points)

				Millions of yen
	Jan-Mar 2023	Jan-Mar 2024	YoY Change	%Change
Net sales	86,530	82,161	(4,368)	(5.0)%
Operating income	11,493	3,489	(8,003)	(69.6)%
Ordinary income	11,804	4,687	(7,116)	(60.3)%
Net income attributable to owners	7,964	1,627	(6,336)	(79.6)%
of the parent company
EBITDA	20,095	13,693	(6,402)	(31.9)%

Average exchange rates:

 

Net Sales, Operating Income and EBITDA by Segment

• Strong performance in carbon black, fine carbon, and industrial furnaces
• Significant decreases in net sales and operating income for smelting and lining and graphite electrodes

												Millions of yen
				Net sales		Operating income			EBITDA
			Jan-Mar 2023	Jan-Mar 2024	YoY Change	Jan-Mar 2023	Jan-Mar 2024		YoY Change	Jan-Mar 2023	Jan-Mar 2024	YoY Change
	Carbon Black	37,406	39,602	+2,195	5,757	5,696		(61)	7,583	8,368	+784
	Fine Carbon	11,444	12,537	+1,092	3,103	3,078		(24)	4,767	4,926	+158
Smelting and Lining	19,218	14,030	(5,188)	408	(3,546)		(3,954)	3,870	551	(3,319)
Graphite Electrodes	13,486	10,874	(2,612)	1,637	(2,175)		(3,813)	2,975	(753)	(3,729)
Industrial Furnaces and	2,449	2,485	+36	534	511		(23)	616	579	(37)
Related Products
		Friction	2,460	2,064	(396)
		materials
Others		Anode	62	568	+505
	materials, etc.
		Total	2,523	2,632	+108	301	224		(76)	415	331	(83)
Inter-segment				(249)	(300)		(50)	(133)	(309)	(175)
	eliminations
		Total	86,530	82,161	(4,368)	11,493	3,489		(8,003)	20,095	13,693	(6,402)
Return on sales				13.3%	4.2%		(9.1)%pt	23.2%	16.7%	(6.5)%pt

※EBITDA =Operating income + Depreciation + Goodwill amortization ※The order of segments has been changed from the current fiscal year

Carbon Black

• Sales volumes slightly decreased YoY due to continued inventory adjustments for replacement tires at tire manufacturers.
• Net sales increased and operating income decreased by only 1%, partly reflecting foreign exchange inflows, despite an increase in depreciation due to environmental investment.

									Net Sales Difference			Operating Income Difference
				Millions of yen
	Jan-Mar	Jan-Mar	YoY Change	%
	2023	2024	Change							FX
					Volume	Sales
									+2,866
								(1,606)	Price									FX	Others
											Volume	Margin
										+935								+452	(549)
Net sales	37,406	39,602	+2,195	+5.9%												(177)	+213
Operating	5,757	5,696	(61)	(1.1)%
income
						Jan-Mar					Jan-Mar				Jan-Mar							Jan-Mar
							2023					2024				2023							2024
ROS	15.4%	14.4%					37,406					39,602				5,757							5,696

Fine Carbon

• Sales of Solid SiC focus rings for memory semiconductors declined due to reduced demand for smartphones and PCs. On the other hand, overall net sales increased YoY, driven by strong demand for power semiconductors. Operating income decreased slightly.

									Net Sales Difference		Operating Income Difference
				Millions of yen
	Jan-Mar	Jan-Mar	YoY Change	%
	2023	2024	Change
									FX
						Volume		Sales
										+897
								(261)		Price											Others
Net sales										Volume	Margin		FX
11,444	12,537	+1,092	+9.5%						+456										(290)
													+383
																				(153)	+36
Operating	3,103	3,078	(24)	(0.8)%
income
						Jan-Mar								Jan-Mar				Jan-Mar						Jan-Mar
							2023						2024				2023						2024
ROS	27.1%	24.6%					11,444								12,537				3,103						3,078

Smelting and Lining

• Both sales volume and sales prices of cathodes declined due to a drop in demand for cathode relining for aluminum smelting furnaces. Raw material and energy costs remained high, resulting in decreases in net sales and operating income.

Jan-Mar

2023

Jan-Mar

2024

YoY Change

Millions of yen	Net Sales Difference	Operating Income Difference

%

Change

Net sales	19,218	14,030	(5,188)	(27.0)%
									Volume
										Sales		FX
Operating	408	(3,546)	(3,954)						(5,312)							Jan-Mar			Margin
income								Price	+1,671			2023			(1,042)		Jan-Mar
									(1,546)
							Jan-Mar						Jan-Mar						Volume	FX		2024
																			Others
								408		(464)
							2023								2024
													(1,923)
ROS	2.1%	(25.3)%																			(526)	(3,546)
				19,218								14,030

Graphite Electrodes

• While electric-arc furnace steel production remained sluggish around the world, low-priced products from China flowed into the global market alongside the overproduction of electrodes in China. Indian electrode manufacturers followed suit, resulting in a sharp decline in the market.
• Operating income decreased significantly YoY, partly due to increased fixed costs caused by low occupancy rates.

				Millions of yen	Net Sales Difference		Operating Income Difference
								Volume
	Jan-Mar	Jan-Mar	YoY Change	%					(834)
	2023	2024	Change					Margin
						(3,227)
Net sales	13,486	10,874	(2,612)	(19.4)%	Volume
(1,668)	Sales	FX	Jan-Mar		Jan-Mar
						Price	+921
						2023		2024
						(1,865)
Operating								Others
1,637	(2,175)	(3,813)					1,637	(2,175)
income					+273
				Jan-Mar			Jan-Mar
							FX
ROS					2023			2024	(25)
12.1%	(20.0)%			13,486			10,874