Tokai Carbon : Q1 FY2024 Securities Report(605KB)

Quarterly Securities Report

(For the First Quarter of the Fiscal Year ending December 31, 2024)

From January 1, 2024

To March 31, 2024

Tokai Carbon Co., Ltd.

(Translation) This document has been translated from the Japanese original for the convenience of overseas stakeholders. In the event of any discrepancy between this document and the Japanese original, the original shall prevail.

Quarterly Securities Report

1. This document consists of output and printed data of the quarterly securities report filed via the Electronic Disclosure for Investors' NETwork (EDINET) as set forth in Article 27-30-2 of the Financial Instruments and Exchange Act, with a table of contents and page numbers.
2. Appended to the back of this document are the quarterly review report that was attached to the quarterly securities report when it was filed by the aforementioned method, and the confirmation letter filed at the same time as the quarterly securities report.

Contents

[Cover]					1
Part I Company Information		2
Section 1	Overview of the Company		2
1	Key Financial Data		2
2	Description of Business		2
Section 2	Status of Business		3
1	Risk of Business, etc		3
2	Management's Analysis of Financial Position, Operating Results, and Cash Flows	............................................................... 3
3	Important Agreements for Operation, etc		5
Section 3	Status of the Submitting Company		6
1	Status of Shares, etc		6
	(1)	Total number of shares, etc		6
		1) Total number of shares		6
		2)	Shares issued		6
	(2)	Status of stock warrants		6
		1)	Stock option system		6
		2) Status of other stock warrants, etc		6
	(3)	Status of exercise, etc. of moving strike warrants		6
	(4)	Change in total number of shares issued and capital, etc		6
	(5)	Major shareholders	エラー!	ブックマークが定義されていません。
	(6)	Voting rights		7
		1)	Shares issued		7
		2)	Treasury stock, etc		7
2	Members of the Board and Audit & Supervisory Board Members		7
Section 4	Status of Accounting		7
1	Quarterly Consolidated Financial Statements, etc		9
	(1)	Quarterly consolidated balance sheets		9
	(2)	Quarterly consolidated statements of income and comprehensive income	11
		Quarterly consolidated statements of income		11
		(First three-month period)		11
		Quarterly consolidated statements of comprehensive income		12
		(First three-month period)		12
	Notes to Quarterly Consolidated Financial Statements	エラー!	ブックマークが定義されていません。
		(Segment infromation, etc.)		12
2	Other Information	エラー!	ブックマークが定義されていません。
Part 2 Information on Submitting Company's Surety Company, etc		18

Quarterly Review Report

Confirmation Letter

[Cover]

[Document submitted]	Quarterly securities report
[Applicable law]	Article 24-4-7, Paragraph 1 of the Financial Instruments and Exchange Act
[Submitted to]	Director of the Kanto Local Finance Bureau
[Date submitted]	May 14, 2024
[Accounting period]	First quarter of FY2024 (from January 1 to March 31, 2024)
[Company name]	Tokai Carbon Co., Ltd.
[Company name in English]	TOKAI CARBON CO., LTD.
[Name and title of representative]	Hajime Nagasaka, President & Chief Executive Officer
[Address of head office]	1-2-3, Kita Aoyama, Minato-ku, Tokyo
[Telephone number]	03-3746-5100 (Switchboard)
[Contact person]	Akira Yamada, General Manager, General Affairs Department
[Nearest place of contact]	1-2-3, Kita Aoyama, Minato-ku, Tokyo
[Telephone number]	03-3746-5100 (Switchboard)
[Contact person]	Akira Yamada, General Manager, General Affairs Department
[Place available for public inspection]	Tokai Carbon Co., Ltd. Osaka Branch
	(Osaka Fukoku Seimei Bldg., 2-4 Komatsubaracho, Kita-ku,Osaka-shi, Osaka)
	Tokai Carbon Co., Ltd. Nagoya Branch
	(Nagoya International Center Bldg., 1-47-1 Nagono, Nakamura-ku, Nagoya, Aichi)
	Tokyo Stock Exchange, Inc.
	(2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo)

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Part I Company Information

Section 1 Overview of the Company

1 Key Financial Data

Fiscal term		First three months of	First three months of	FY2023
	FY2023	FY2024
Accounting period		(January 1 to March 31,	(January 1 to March 31,	(January 1 to December
	2023)	2024)	31, 2023)
Net sales	(Million yen)	86,530	82,161	363,946
Ordinary income	(Million yen)	11,804	4,687	41,607
Profit attributable to owners of the	(Million yen)	7,964	1,627	25,468
parent company
Quarterly comprehensive income or	(Million yen)	14,415	24,854	67,435
comprehensive income
Net assets	(Million yen)	312,082	381,117	360,103
Total assets	(Million yen)	582,246	660,242	640,005
Quarterly net income per share or	(Yen)	37.36	7.63	119.45
net income per share
Quarterly diluted net income per	(Yen)	-	-	-
share or diluted net income per share
Equity ratio	(%)	48.1	52.1	50.7

Notes: 1. The Company prepares quarterly consolidated financial statements, and thus does not state changes in the key financial data of the company filing the report.

2. Diluted net income per share is not shown because there were no dilutive shares.

2 Description of Business

There have been no significant changes in the business operations of the Group (the Company and its subsidiaries and associates) in the first quarter consolidated cumulative period.

There are also no changes in major subsidiaries or associates.

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Section 2 Status of Business

1 Risk of Business, etc.

Among the matters related to the business status, accounting status, etc. stated in this quarterly report for the first quarter consolidated cumulative period, there are no major risks that the management recognizes as having the potential to have a significant impact on the consolidated financial position, operating results, and cash flows. Also, there are no significant changes to the "Risk of Business, etc." stated in the securities report of the previous fiscal year.

2 Management's Analysis of Financial Position, Operating Results, and Cash Flows

The forward-looking statements contained herein are based on the judgments of the Group as of the end of the total period of the Quarterly Consolidated Financial Statements.

(1) Financial position and operating results

During the first three months of 2024 (from January 1 to March 31, 2024) the global economy continued to show a strong sense of stagnation due to the sluggish economy in Europe and the slow growth of the Chinese economy, despite the steady performance of the U.S. economy. There are concerns about the impact of heightened geopolitical risks, such as the deteriorating situation in the Middle East, on the outlook for the global economy.

Under these circumstances, in February this year, Tokai Carbon Group disclosed the rolling medium-term management plan "T- 2026", for the three-year period from 2024 to 2026. Based on the three basic policies of "Strengthening the earnings power of core businesses," "Enhancing business portfolio management," and "Pursuing sustainability management," we aim to achieve quantitative targets of 458 billion yen in net sales, 53 billion yen in operating income, 12% in ROS, and 104 billion yen in EBITDA by 2026. We aim to increase our corporate value and promptly improve our PBR by reviewing our production system in Graphite Electrodes, actively investing in the growing businesses of fine carbon and industrial furnaces and focusing on various sustainability measures.

As a result, net sales for the first three months of 2024 decreased 5.0% year on year to 82,161 million yen. Operating income decreased 69.6% year on year to 3,489 million yen. Ordinary income decreased 60.3% year on year to 4,687 million yen. Quarterly net income attributable to owners of the parent company decreased 79.6% year on year to 1,627 million yen.

Results by business segment were as follows:

Carbon Black

Although sales volume decreased slightly year on year in replacement tires due to ongoing inventory adjustments by tire manufacturers, net sales increased year on year due to the impact of exchange rates and other factors. Operating income decreased in year on year due to an increase in depreciation costs resulting from the start of operations at large-scale environmental facilities in North America, which was completed at the end of the previous fiscal year, as well as higher raw materials prices.

As a result, net sales for the Carbon Black business increased 5.9% year on year to 39,602 million yen, while operating income decreased 1.1% year on year to 5,696 million yen.

Fine Carbon

Sales of the solid SiC focus ring, a key product for the memory semiconductors market, declined year on year due to the impact of export regulations in the U.S. and China as well as in customers' inventory adjustments due to a decline in demand for smartphones and personal computers. On the other hand, demand for products used in power semiconductors remained strong, and production and sales remained steady. As a result, the segment as a whole recorded increased sales and decreased profits year on year.

As a result, net sales for the Fine Carbon business increased 9.5% year on year to 12,537 million yen, while operating income decreased 0.8% year on year to 3,078 million yen.

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Smelting & Lining

Cathodes for aluminum electrolysis sales volume decreased year on year and selling prices also declined due to a decline in demand for replacements of aluminum smelting furnaces. Earnings were also squeezed by high raw materials and energy costs at our European location.

As a result, net sales for the Smelting and Lining business decreased by 27.0% year on year to 14,030 million yen, and operating loss, including the burden of amortization of goodwill, was 3,546 million yen (compared with 408 million yen in operating income in the same period of the previous year).

Graphite Electrodes

Amid continued weakness in steel production, demand declined in the Company's main markets of Asia, North America and Europe, partly due to customers' inventory adjustments. As a result, sales volumes fell sharply year on year and selling prices continued to fall. Higher energy, labor and other costs, as well as lower operation rate prices, also contributed to lower sales and profits year on year.

As a result, net sales for the Graphite Electrodes business decreased 19.4% year on year to 10,874 million yen, while operating loss was 2,175 million yen (compared with 1,637 million yen in operating income for the same period of the previous year).

Industrial Furnaces and Related Products

Demand recovered in China, although inventory adjustments and project delays continued in the energy-related industry and the electronic components industry, which are the main markets for industrial furnaces and heating elements. As a result, sales increased while profits decreased in year on year.

As a result, net sales for the Industrial Furnaces and Related Products business increased 1.5% year on year to 2,485 million yen, while operating income decreased 4.3% year on year to 511 million yen.

Other Operations

Friction materials

Demand in the construction machinery and electromagnetic equipment markets declined due to a slowdown in the Chinese market, while demand in the mining machinery market declined due to a fall in the price of resources. As a result, net sales decreased in year on year. At the same time, the motorcycle market remained stable.

As a result, net sales of friction materials decreased 16.1% year on year to 2,064 million yen.

Anode materials

A recovery in sales of EVs and ESS (Energy Storage Systems), in which our materials are used, led to an increase in sales compared with the same period of the previous year.

As a result, net sales of anode materials increased significantly year on year to 535 million yen (compared with 29 million yen in net sales for the same period of the previous year).

Others

Net sales from real estate leasing and other business decreased 2.4% year on year to 32 million yen.

As a result, net sales for Other Operations increased 4.3% to 2,632 million yen, while operating income decreased 25.5% to 224 million yen.

Total assets at the end of the first quarter under review (March 31, 2024) increased by 20,236 million yen from the end of

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previous fiscal year to 660,242 million yen due to an increase in tangible fixed assets. Liabilities decreased 776 million yen from the end of previous fiscal year to 279,125 million yen due to a decrease in trade payables such as accounts payable despite an increase in interest-bearing liabilities such as borrowings. Net assets increased by 21,013 million yen from the end of previous fiscal year to 381,117 million yen due to an increase in foreign currency translation adjustments.

As a result, the Group's equity ratio was 52.1%, an increase of 1.4 points from the end of previous fiscal year.

1. Accounting estimates and assumptions used in such estimates
   There was no material change in the accounting estimates and assumptions used in such estimates stated in the "Management's analysis of financial position, operating results, and cash flows" of the Securities Report for the previous fiscal year.
2. Business and financial issues to be addressed
   During the first three months of the fiscal year under review, there was no material change in the Group's issues to be addressed stated in the Securities Report for the previous fiscal year.
3. Research and development
   The group-wide research and development activities for the first three months of the fiscal year under review costed 1,058 million yen.
   During the first three months of the fiscal year under review, there was no material change in the Group research and development activities.
4. Management policy, management strategy, etc.
   During the first three months of the fiscal year under review, there was no material change in the Group management policy, management strategy, etc.

3 Important Agreements for Operation, etc.

Not applicable.

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Section 3 Status of the Submitting Company

1 Status of Shares, etc.

1. Total number of shares, etc.

1. Total number of shares

Type

Total number of shares authorized to be issued (Shares)

Common shares

598,764,000

Total

598,764,000

1. Shares issued

	Number of shares	Number of shares	Name of listed financial
	issued as of end of the	instruments exchange or
	issued as of date of
Type	first quarter (Shares)	registered authorized	Details
submission (Shares)
	(As of March 31,	financial instruments
	(As of May 14, 2024)
	2024)	exchange association
Common shares	224,943,104	224,943,104	Tokyo Stock Exchange	Share unit: 100 shares
Prime Market
Total	224,943,104	224,943,104	-	-

1. Status of stock warrants

1. Stock option system Not applicable.
2. Status of other stock warrants, etc. Not applicable.

1. Status of exercise, etc. of moving strike warrants Not applicable.
2. Change in total number of shares issued and capital, etc.

	Increase		Increase		Increase
	(decrease) in	Total number of
	(decrease) in	Capital	(decrease) in	Capital reserve
Period	total number of	shares issued
capital	(Million yen)	capital reserve	(Million yen)
	shares issued	(Shares)
	(Million yen)		(Million yen)
	(Shares)
January 1, 2024 -	-	224,943,104	-	20,436	-	17,502
March 31, 2024 (Note)

Note: The increase was due to the exercise of stock acquisition rights.

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1. Major shareholders
   There are no matters to be stated as the period under review constitutes the first quarter of the fiscal year.
2. Voting rights
   "Information on voting rights" as of the end of the first quarter under review (March 31, 2024) is based on the list of shareholders as of the most recent record date (December 31, 2023), since the list as of March 31, 2024 is not available for confirmation.

1) Shares issued

				(As of March 31, 2024)
Category	Number of shares (Shares)	Number of voting rights	Details
Non-voting shares		-	-	-
Shares with limited voting rights		-	-	-
(Treasury stock, etc.)
Shares with limited voting rights		-	-	-
(Other)
Shares with full voting rights	(Treasury stock)		-	-
(Treasury stock, etc.)	Common shares	11,727,600
Shares with full voting rights	Common shares	212,998,400	2,129,984	-
(Other)
Odd-lot shares	Common shares	217,104	-	Shares below unit number
(100 shares)
Total number of shares issued		224,943,104	-	-
Total shareholder voting rights		-	2,129,984	-

Note: The 1,000 shares (10 voting rights) held by the Japan Securities Depository Center are included under "Shares with full voting rights (Other)."

1. Treasury stock, etc.

(As of March 31, 2024)

		Number of	Number of		Ownership ratio
		shares held	Total number of	based on total
		shares held in
Name of holder	Address of holder	under different	shares held	number of
own name
		names	(Shares)	shares issued
		(Shares)
		(Shares)		(%)
(Treasury stock)	1-2-3, Kita Aoyama,	11,727,600	-	11,727,600	5.21
Tokai Carbon Co., Ltd.	Minato-ku, Tokyo
Total	-	11,727,600	-	11,727,600	5.21

2 Members of the Board and Audit & Supervisory Board Members Not applicable.

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