Tokai Carbon : Q2 FY2020 Earnings Presentation

Q2 FY2020

Earnings Presentation

2 0 2 0 /8/ 5

Table of Contents

Ⅰ Q2 FY2020 Financial Summary	P 3-16
Ⅱ	FY2020 Earnings Forecast	P17-20
Ⅲ	Outlook	P21-30

Reference material

P31-34

Ⅰ

Q2 FY2020

Financial Summary

FY2020 Summary (January-June 2020

Business Environment and Events

• The economic recession ensuing from the COVID-19 pandemic materially impacted the Q2 financial results
• Our two core business Graphite electrode and Carbon black was severely depressed by decline in demand of steel industry and tire industry. On the other hand, demand for Fine carbon and Industrial furnaces was strong due to the growth of 5G/IoT-related markets.
• Under these circumstances, Tokai Carbon deployed the measures to improve profitability by company-wide investment restraint, production adjustment/inventory reduction, productivity improvement/cost reduction and took financial measures to secure liquidity.
• Completed acquisition of all shares of Carbone Savoie International SAS, which owns Carbone Savoie SAS, a French carbon graphite product manufacturer (July 17, 2020)
• Issued the second hybrid corporate bond (subordinated corporate bond) through public offering (June 30, 2020)
• Tanoura Plant (Kumamoto Prefecture), a manufacturing site to produce material for the fine carbon business, was damaged by heavy rain in July 4, 2020. Restoration of production facilities will be in late August apart from the graphitization furnace where the fire broke out. Impact on supply chain is limited due to effective utilization of production facilities and inventory within the group.

Operating Trends

 Net Sales

¥93.7 billion decreased 32.6% YoY

• Lower sales volume and price (Graphite electrodes and Carbon black)
• Tokai COBEX contributes to the consolidated company sales from August 2019

 Operating income

¥5.8 billion decreased 85.6% YoY

Summary of Consolidated Results

• Net sales ¥93.7 billion, Operating income ¥5.8 billion, ROS 6.2
• Net sales and Operating income decreased YoY

									Millions of yen
	Jan-Jun 2019		Jan-Jun 2020	YoY Change		%Change
Net sales		139,176		93,738	▲45,438		▲32.6%
Operating income		40,441		5,817	▲34,623		▲85.6%
Ordinary income		40,562		5,163	▲35,399		▲87.3%
Net income attributable to
owners		26,067		2,158	▲23,908		▲91.7%
of the parent company
Group companies	As of June 30, 2020		Average exchange rates:
 Consolidated subsidiaries:	33			 2019	USD1	¥110.05, EUR1=¥124.32
 Equity method affiliates:	2			 2020	USD1	¥108.27, EUR1=¥119.3

YoY Analysis: Net Sales

• Lower sales volume and lower margin (Graphite electrodes and Carbon black)
• Results in, Net sales decline 32.6% YoY

increase/

Millions of yen

Summary

(decrease)

Graphite electrodes: ¥22.6bn

Volume 25,598 Carbon black: :( ¥16.3bn)

Smelting and Lining: (+¥12.9bn)

Sales	18,016	Graphite electrodes:	¥12.9bn
Price	Carbon black ( ¥5.1bn)

Volume

Sales Price

FX

25,598 18,016 1,822

FX

1,822

Yen appreciation USD Euro

Jan-Jun	Jan-Jun
2019	2020
139,176	93,738		Total	▲45,438

YoY Analysis: Operating Income

• Lower sales volume and lower margin (Graphite electrodes and Carbon black)
• Result in, Operating income decline 85.6% YoY

Amortizationof goodwill:

4,070

Increase/

（Millions of yen）

Summary

Acquisition-related expenses	+ 755
Inventory valuation loss return	+ 999

Volume Margin FX Other

16,101

16,203

266

2,053

Jan-Jun

(decrease)

Graphite electrodes: ( ¥14.6bn)

Volume 16,101 Carbon black: ( ¥5.8bn) Smelting and Lining: (+¥43bn)

Margin	16,203	Graphite electrodes ¥15.8bn
Carbon black ( ¥3bn)

FX

266

Yen appreciation

Jan-Jun

2019

40,441

2020

5,817

Other	2,053	Goodwill amortization, etc.

Total ▲34,623

Net Sales and Operating Income by Segment

• Net sales and Operating income decreased YoY
• Tokai COBEX business was newly segmented as "Smelting and Lining" (from August 2019)

								Millions of yen
				Net sales			Operating income
			Jan-Jun2019	Jan-Jun2020	YoY Change	Jan-Jun2019	Jan-Jun2020	YoY Change
Graphite Electrodes	57,052	20,927	▲36,124	31,340	1,522	▲29,818
Carbon Black	54,595	32,630	▲21,964	5,686	▲108	▲5,795
	Fine Carbon	15,960	15,544	▲415	3,455	3,484	+28
Smelting and Lining		12,900	+12,900	▲972	▲238	+733
Industrial Furnaces and	5,013	6,390	+1,376	1,348	1,659	+310
Related Products
		Friction	3,916	3,175	▲741
		materials
Other		Anode	2,564	2,097	▲467
	materials
Operation
Others	72	71	▲1
			6,554	5,344	▲1,210	199	233	+34
Inter-segment eliminations				▲618	▲734	▲116
		Total	139,176	93,738	▲45,438	40,441	5,817	▲34,623

Graphite Electrodes

• Graphite electrode demand declined by weak steel demand and inventory adjustment at customer. COVID-19 pandemic was an further hit to this condition
• Decline in Sales 63.3%, Operating income 95.1% YoY

			Millions of yen		Net Sales Difference				Operating Income Difference
	Jan-Jun	Jan-Jun	YoY	%
	2019	2020	Change	Change
															Inventory valuation loss return +660
Net sales	57,052	20,927	▲36,124	▲63.3%			Sales
								Volume	FX
								22,684	price	474
Operating	31,340	1,522	▲29,818	▲95.1%			12,966					Volume	Margin	FX	Other
					14,608	15,897	42	+729
income
																	Jan-Jun
							Jan-Jun				Jan-Jun			Jan-Jun			2020
ROS	54.9%	7.3%					2019				2020	2019			1,522
							57,052				20,927	31,340

Carbon Black

• Auto and tire producers suspended operation one after another from late March. Demand of Carbon black for April to June period was severely depressed. Recorded around 30% drop in volume YoY
• Implemented production cuts corresponding to the collapse in carbon black demand. ROS ▲0.3% (10.4% YoY) due to the sharp increase in cost of sales ratio

			Millions of yen		Net Sales Difference	Operating Income Difference
	Jan-Jun	Jan-Jun	YoY	%
	2019	2020	Change	Change
Net sales	54,595	32,630	▲21,964	▲40.2%		Volume
								16,332		Sales		FX
											price												Fixed cost: +368
											505
										5,127
Operating
																Jan-Jun
5,686	▲108	▲5,795	%
income															2019		Volume
															Jan-Jun				5,686		5,855		Margin					Other
ROS	10.4%	0.3%					Jan-Jun													389		FX	+458
			2019								2020									8
													Jan-Jun
						54,595								32,630
																										2020

▲108

Fine Carbon

• Sales volume for general industry dropped by production/inventory adjustments at customer due to the spread of COVID-19 pandemic
• Robust sales of Semiconductors and PV business
• Results in, 2.6% decline in Net sales, 0.8% increase in Operating income on YoY

Net Sales Difference	Operating income Difference
Millions of yen

	Jan-Jun	Jan-Jun	YoY	%
	2019	2020	Change	Change
Net sales	15,960	15,544	▲415	▲2.6%
Operating	3,455	3,484	+28	+0.8%
income
ROS	21.7%	22.4%

Fixed cost: 192

		Volume	FX
		+305	789
									Volume	Margin	FX	Other
									+148	+263	206	176
	Jan-Jun				Jan-Jun			Jan-Jun					Jan-Jun
	2019				2020			2019						2020
	15,960				15,544			3,455						3,484

Smelting and Lining

• Tokai COBEX (TCX) consolidated from August 2019
• Q2 Operating income of TCX resulted in ¥4.4b. Contribution to the consolidated operating income although was negative ¥0.2b since in the segment accounting, 2.4b amortization cost of valuation difference arising from the allocation of acquisition cost, ¥1.9 goodwill amortization and ¥0.2b one-off M&A related cost for Carbone Savoie acquired in July 17, 2020, were accounted

Millions of yen

Net sales Difference

Operating income Difference

Jan-Jun

Jan-Jun

YoY

%

Valuation difference amortization:

2,444

2019

2020

Change

Change

Sales

Goodwill amortization:

1,944

Volume

FX

Acquisition related expenses:

+755

price

+12,900

Net sales

12,900

+12,900

Operating

▲972

▲238

+733

+75.4%

income

Jan-Jun

Jan-Jun

Volume

Margin FX

Other

2019

2020

ROS

%

1.9%

Jan-Jun

Jan-Jun

▲972

+4,397

3,664

▲238

2020

2019

12,900

Industrial Furnace and Related Products

• Ceramic heaters: Lower sales YoY. Demand of Electric components industry and in China dropped by the spread of COVID-19 pandemic.
• Industrial furnaces: Higher sales YoY. Robust CAPEX in IT industry and Energy related industry

			Millions of yen		Net Sales Difference		Operating income Difference
	Jan-Jun	Jan-Jun	YoY	%
	2019	2020	Change	Change
					Volume		Sales		FX
										price
										44
Net sales	5,013	6,390	+1,376	+27.4%					+1,527	107
																		Volume	Margin	FX	Other
																		+435	61	8	56
Operating	1,348	1,659	+310	+23.0%
income
							Jan-Jun								Jan-Jun			Jan-Jun			Jan-Jun
ROS	26.9%	26.0%				2019								2020			2019			2020
						5,013								6,390			1,348			1,659

Other Business Friction Material,LiB Anode Materials





Friction materials: Lower sales volume due to the exit from the four-wheel automotive business and spread of the COVID-19 pandemic

Net sales ¥3,175 million 18.9% YoY

Anode materials Lower sales volume YoY due to the harsh competition driven by the new

entrants
Net sales ¥2,097 million	18.2% YoY

			Millions of yen
	Jan-Mar	Jan-Mar	YoY	%
	2019	2020	Change	Change
Net sales	6,554	5,344	1,210	18.5%
Operating	199	233	+34	+17.3%
income
ROS	3.0%	4.4%

Net Sales Difference

Operating income Difference

Inventory valuation loss return: +234

Fixed cost:

+539

Volume Sales FX

1,314 price 10

+115

		Jan-Jun	Volume	Margin	FX	Other	Jan-Jun
		2019	2020
Jan-Jun	Jan-Jun	199	618	119	2	+773	233
2019	2020

6,554	5,344

Cash Flow

Major Cash Flow items			Millions of yen
		Jan-Jun 2019	Jan-Jun 2020	Summary
Cash flows from operating activities	15,027	25,536
	Net income (loss) before income taxes	40,295	5,074
	Depreciation and amortization	6,743	9,998
	Amortization on goodwill	1,315	3,194
	Decrease (increase) in trade receivable	433	15,716
	Decrease (increase) in inventories	17,840	7,077
				Working capital +10,933 (Jan-Jun 2019: 19,651)
	Increase (decrease) in accounts payable-	2,244	11,860
	trade
	Income tax paid	13,675	3,663
Cash flows from investing activities	9,661	13,532	Free cash flow: ¥12,003 million increase +¥6,638 million YoY
	Purchase of property, pant and	9,466	12,063
	equipment
Cash flows from financing activities	8,420	9,095
	Net increase (decrease) in short-term	5,008	4,944
	Loans payable
	Bond issuance	-	20,000
	Payment of dividends	2,557	5,115
Cash and cash equivalents at end of period	37,172	66,630

※Working capital = Trade receivables + Inventories - accounts payable-trade

Balance Sheet

Major Balance Sheet Items					Millions of yen
			December 31,	June 30,			Summary
			2019	2020
Total assets	462,872	448,563
	Current assets	196,446	190,957	Cash/monthly sales: 4.7times End of FY2019:2.4 times
		Cash and cash equivalents	52,695	74,198
		Inventory	¥8,262 million from the end of FY2019)
		Notes and accounts	50,648	34,146
		receivable
		Inventory	86,380	78,118	Tangible fixed assets: +¥4,752 million from the end of FY2019
	Fixed assets	266,425	257,606
	Intangible fixed assets:	¥101,22 million from the end of FY 2019
		Tangible fixed assets	101,343	106,096
		Intangible fixed assets	141,966	131,844
		Investments and other	23,115	19,666
		assets
Total liabilities	229,896	228,331	Interest-bearing debt:¥163,046 million +15,016 million from End of FY2019
	Current liabilities	117,541	83,396	Direct-funding ratio:58.3	(End of FY2019: 43.9%)

Long-term debt ratio: 68.3 % (End of FY2019: 53.8%)

	Long-term liabilities		144,934	Short term credit line:¥62 billion (End of FY2019: ¥40 billion), ¥20 billion executed
	112,355	Liquidation of receivables and CP issuance limit:
				¥58 billion (End of FY2019: ¥48 billion), ¥40 billion executed
Total net assets	232,975	220,232	Capital-to-asset ratio: 44.5% (End of 2019 45.8%)
	Shareholder's capital	203,819	200,881
	Adjusted Capital-to-asset ratio*:52,3% (End of 2019: 51.2%)
	Other accumulated
	8,019	1,412	Net D/E ratio: 0.4 times (End of 2019: 0.5 times)
	Comprehensive income
			Adjusted Net D/E ratio: 0.2 times (End of 2019: 0.3 times)
	Non-controlling interests	21,137	20,764
Total liabilities and net assets	462,872	448,563

※Adjusted capital-to-asset ratio is the ratio that takes into account the equity qualifications of rating agencies in hybrid finance

Ⅱ

F Y 2 0 2 0

Earnings Forecast

Consolidated Earnings Forecast FY2020

• Sales and Operating income steeply declined from Q2 in Graphite electrodes and Carbon black business
• Limited impact of COVID-19 to Fine carbon, Smelting and lining and Industrial furnace business

								Millions of yen
	Previous Forecast February 12	Updated Forecast for FY 2020	YoY	% Change
							Change
	1H	2H	Full Year	1H	2H	Full Year
Net sales	120,100	131,100	251,200	93,738	96,262	190,000	61,200	24.4%
Operating income	10,500	17,700	28,200	5,817	283	6,100	22,100	78.4%
Ordinary income	10,300	17,500	27,800	5,163	163	5,000	22,800	82.0%
Net Income
attributable to owners	5,600	11,000	16,600	2,158	1,158	1,000	15,600	94.0%
of the parent
company
ROS	8.8%	13.5%	11.3%	6.2%	0.3%	3.2%
ROIC			5.7%
ROE			8.0%			0.5%

Group companies	Average exchange rates:
 Consolidated subsidiaries: 34
 USD1=¥106 , EUR1=¥119
 Equity method affiliates: 2

Net Sales and Operating Income Forecast by Segment

Millions of yen

				Previous Forecast (February 12)	Updated Forecast for FY 2020	YoY Change	% Change
				1H	2H	Full year	1H	2H	Full year
Net Sales		120,100	131,100	251,200	93,738	96,262	190,000	61,200	24.4%
	Graphite Electrodes	31,100	34,800	65,900	20,927	16,172	37,100	28,800	▲43.7%
	Carbon Black		46,900	46,400	93,300	32,630	29,069	61,700	31,600	▲33.9%
	Fine Carbon		13,700	15,000	28,700	15,544	14,555	30,100	+1,400	+4.9%
	Smelting and Lining	16,000	21,000	37,000	12,900	23,399	36,300	700	▲1.9%
	Industrial Furnaces and	7,100	8,500	15,600	6,390	8,310	14,700	900	▲5.8%
	Related Products
			Friction materials	3,900	3,900		7,800	3,175	2,925	6,100	1,700	▲21.8%
	Other		Anode materials	1,300	1,400		2,700	2,097	1,803	3,900	+1,200	+44.4%
	Operation		Others	100	100		200	71	28	100	100	▲50.0%
			Total Others	5,300	5,400	10,700	5,344	4,756	10,100	600	▲5.6%
Operating Income	10,500	17,700	28,200	5,817	283	6,100	22,100	78.4%
	Graphite Electrodes	2,900	5,100		8,000	1,522	▲5,222	▲3,700	11,700	▲146.3%
	Carbon Black		3,600	4,000		7,600	108	309	200	7,400	▲97.4%
	Fine Carbon		2,200	2,900		5,100	3,484	2,516	6,000	+900	+17.6%
	Smelting and Lining	800	4,000		4,800	238	1,939	1,700	3,100	▲64.6%
	Industrial Furnaces and	1,600	2,200		3,800	1,659	1,740	3,400	400	▲10.5%
	Related Products
	Others		200	200		400	233	▲234	0	400	▲100.0%
	Inter-segment eliminations	800	700		1,500	734	765	1,500	0	-
		▲	▲			▲	▲

Dividend policy

• Steady dividends on a continued base targeting 30% payout ratio
• FY2020 dividend of ¥30 per share projected (¥15 per share each for mid and year-end dividend)

Dividend per share and Net income

yen/share																				Millions of yen
			Yen/Share				Net Income (right axis)
												48		70,000
																				50,000
																		24			30	30,000
							Consistently stable dividend
										12
			8
				8		7	6	6	6	6						10,000
																						(10,000)
		Year	2010	2011		2012	2013	2014	2015	2016	2017	2018	2019	2020f
	Total dividend		1742		1,708		1,708			1,280	1,280	1,280	1,280	2,556	5,114	10,230	6,394
		Millions of yen
	Payout ratio		31%		28%		75%			106%	50%	52%	-	21%	7%	32%	640%

Ⅲ

F Y 2 0 2 0

Outlook

Achieving the target of T-2022

T-2022 Basic policies unchanged



Outlook for the Graphite Electrode Business

• Demand declined corresponding to the operational cuts in EAF. Still highly uncertain of the 2nd half business negotiation
• Full recovery may not arrive until the end of 2021
• Fundamentals surrounding the business remain unchanged (electrode demand will grow over the medium term)

Short-Term Forecast for Steel Material Demand (World Steel Association

Steel demand may not fully recover until the end of 2021

		Million tons			YoY growth
	2019	2020f	2021f	2019	2020f	2021f
EU(28)	158.1	133.1	147.0	-5.6%	-15.8%	10.4%
Europe	33.8	33.3	36.5	-10.0%	-1.6%	9.7%
(other)
CIS	58.8	52.7	56.5	5.6%	-10.3%	7.1%
NAFTA	135.0	108.0	114.7	-4.0%	-20.0%	6.2%
Latin	42.4	35.1	39.3	-3.6%	-17.3%	12.2%
America
Africa	36.4	33.0	34.9	0.4%	-9.4%	5.9%
The Middle	48.7	40.2	45.4	-2.3%	-17.4%	12.9%
East
Asia and	1253.3	1218.6	1243.2	6.5%	-2.8%	2.0%
others
Global total	1766.5	1653.9	1717.4	3.4%	-6.4%	3.8%

Medium- to Long-Term Perspective

Fundamentals surrounding the electrode business remain unchanged

 Regional Breakdown of Global	 Percentage of EAF Steel by Region (2018)
Crude Steel Production

						To be raised above
			66%				25%
	Other
North			53
			44%
Americ		China			41%
a		Approx.
EU
	50					11%
	Asia
	India		North	India	Asia	Other	China
	2018	America

Over the medium to long term, global crude steel production is expected to continue its growth track, while a switch to Electric Arc Furnace (EAF) will be promoted to reduce environmental burden; growth in electrode demand is thus anticipated.

Source WSA f=forecast

Outlook for the Carbon Black Business

• Demand significantly fell in the short term due to temporary shutdown by automakers and tire manufacturers
• Despite expectations for recovery by the end of 2020, the outlook remains unclear due to risks associated with the resumption of economic activities
• Full-scaledemand recovery depends on automobile production and tire consumption trends

Operational Status of Tire Manufacturers

	Jan	Feb	Mar	Apr	May	Jun		Jul-Dec
Asia(China)		Rapid decline				Recovery
Europe	-		Rapid decline			Moderate	Recovery
North America	-	-		Rapid decline		Moderate Recovery

Direction of business portfolio

Improve business portfolio dependent on major businesses by expanding into growth markets

Net Sales Billions of yen

	Carbon Black
Other
Carbon Black	Graphite Electrode
Graphite Electrode

Industrial Furnaces

Carbon BlackSmelting and Lining

Fine Carbon

Carbon Black

Graphite Electrode

Graphite Electrode

2017

2018

2019

2020f

Building a future of Smelting and Lining business

The next largest pillar to Graphite electrode and Carbon black

(representing 20%+ of consolidated sales

Maintenance of a Sound Financial Position

Financial policies to expand and diversify our global business base

Basic Financial Policies

• Secure liquidity to support growth strategies and maintain financial soundness
• We will enhance our management structure, and maintain and improve our credit rating (R&I: A-)

Liquidity on Hand

• Raise the level of liquidity on hand by 3.3 times in 3 years

We will increase the level of liquidity on hand (cash and deposits + short- term liquidity line) to build up resistance against uncertainty. We optimize capital efficiency by managing the cash position of the entire Group through the employment of a global cash management system (GCMS).

(Reference)			(100 million yen)
2017/12	2018/12	2019/12	2020/6
Untapped short-term liquidity line	240	340	420	780
Cash and deposits	222	468	527	742
On-hand liquidity ratio (times)	2.5	2.4	2.4	4.7

1. Strengthen the financial base and maintain/improve the credit rating
2. Secure long-term, stable financing and maintain access to financial and capital markets
3. Maintain liquidity, refinance, and reduce risk
4. Optimize global cash management and capital efficiency (Global Cash Management System/in-house banking function)

(100 million yen)
1,800									6.0
				3.3 times
1,500								5.0
1,200									4.0
900									3.0
600									2.0
300									1.0
0									0.0
2017	2018	2019	2020
		Untapped short-term liquidity line			Cash and deposits

On-hand liquidity ratio (times)

*On-hand liquidity ratio is calculated by dividing liquidity on hand (cash + deposits) by monthly sales (net sales/consolidated accounting period)

Maintenance and Improvement of Credit Rating and Debt

Reduction

Executed M&A worth a total of 180 billion yen over four years. Hybrid financing underpinned the credit rating in the A-zone while preventing stock dilution

Lower adjusted net D/E ratio from 0.3 times to 0.0 times

Subordinated

Subordinated

Subordinated

in four to five years

Bonds No. 1

Loan No. 1

Bonds No. 2

Maturity

30NC5

30NC7

30NC10

We will secure liquidity on hand and reduce debt pursuing a net cash position

to increase our ability to invest in the future. Our policy is to use a certain

Amount raised

25,000

25,000

20,000

amount of operating cash flow to repay borrowings and lower the adjusted net

Issue date

2019/12/10

2019/12/27

2020/6/30

debt-to-equity ratio from 0.3 times to 0.0 times.

Net D/E

1st call date

2024/12/10

2026/12/27

2030/6/30

0.500

5-year yen swap

7-year yen swap

10-year yen swap

Interest rate (%)

rate

rate

rate

0.000

+0.85%

+0.95%

+1.70%

Step-up

Initial spread +1.0% after the first call date

0.500

Optional coupon

Optional deferral allowed (cumulative) / mandatory

2017 2018 2019 2020

skips

payment clause provided / subject to additional interest

Replacement	Provided in the terms and conditions of the bonds; there
restrictions clause	are exceptions
Subordination	Subordination
clause
Issuer rating	A- (R&I)
Bond rating	BBB (R&I)

(Reference)			(100 million yen)
	2017/12	2018/12	2019/12	2020/6
Adjusted net interest-bearing debt	(60)	29	703	538
Adjusted equity	1,264	1,871	2,368	2,345
Adjusted net D/E (times)	(0.047)	0.016	0.297	0.230

Equity credit	50% (R&I)	*Adjusted net D/E is the debt-to-equity ratio that takes into account the equity credit assigned by
		rating agencies in hybrid financing.

ESG activities

• Emphasize activities to achieve Sustainability Goals
• Establishing ESG structure to follow globalization of our business

	Materiality and Sustainability Goals	excerpts
	Materiality	Materiality	Fiscal2020 Sustainability Goals
	(Themes)	Elements
	Harmony	Reducing	Reducing greenhouse		Reduce energy consumption per
	with the	environmental	gas emissions		unit production(cut by 1% or
	global	impact			more annually)
	environment
		Technological	Emphasize research		Devote 60% or more of
	Contributing	Innovation	and development		development expenditures to
	to society				reducing environmental burden
	through our	Supplying safe	Further elevate quality		Reduce electrode consumption
	business	and secured			rate(3% reduction from 2019)
		products
		Strengthening
		Corporate	Establish a consolidated governance system
	Strengthenin	Governance
	g our
	management	Promoting	Reduce occupational			Reduce frequency rate of
	base	Occupational	accidents			occupational accidents(0.98 or
		Safety and				lower)
		Health

Listed in the ESG indices (FTSE) in June 2020

These indices are developed by FTSE Russell, a wholly owned subsidiary of London Stock Exchange Group.

Companies that demonstrate strong ESG efforts are selected these indices.

FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) confirms that Tokai Carbon has been independently assessed according to the FTSE4Good and FTSE Blossom Japan Index criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index Series and FTSE Blossom Japan Index. Created by the global index provider FTSE Russell, the FTSE4Good Index Series and FTSE Blossom Japan Index are designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE4Good indices and FTSE Blossom Japan Index are used by a wide variety of market participants to create and assess responsible investment funds and other products.FTSE4Good Index Series: https://www.ftserussell.com/products/indices/FTSE4Good

FTSE Blossom Japan Index:https://www.ftserussell.com/products/indices/blossom-japan

Our continued commitment to sustainability





¥14

billion+

The Addis Plant, in Louisiana, will also receive new waste-heat recovery equipment. The plant meet all of its electricity needs internally.

Environmental CAPEX initiatives

Three U.S. Carbon black production introduced scrubbers to reduce the environmental load during the production

CO2

reduction

The scrap recycling EAF mill will increase worldwide in the light of reducing environmental load and recycle0

Realizing recycling society

We contribute to reduce CO2 emission by stably supplying high quality (lower consumption rate) graphite electrode

Reference Material

Net Sales of Main Subsidiaries

Millions of yen

Subsidiary	Jan-Jun	Jan-Jun	YoY Change	Location	Summary
2019	2020	/Business
Tokai ErftCarbon	18,244	6,871	11,373	Germany
Graphite Electrodes
Tokai Carbon GE	22,519	7,049	15,469	U.S.	Contributing to consolidated
Graphite Electrodes	results from November 2017
Thai Tokai Carbon Product	9,351	5,034	4,317	Thailand
Carbon Black
Tokai Carbon Tianjin	2,342	1,517	824	China
Carbon Black
Tokai Carbon CB	24,265	14,173	10,092	U.S.	Contributing to consolidated
Carbon Black	results from September 2018
Cancarb	3,633	3,024	608	Canada
Carbon Black
Tokai Carbon Korea	8,486	9,669	+1,182	Korea	Contributing to consolidated
Fine Carbon	results from June 2018

Key Indicators

				f=forecast	Millions of yen
	2016	2017	2018	2019		2020 f
Net Sales	88,580	106,252	231,302	262,028		190,000
Operating Income	1,131	11,093	73,065	54,344		6,100
EBITDA	9,627	18,201	85,374	77,053		32,000
Net income Attributable to	7,929	12,346	73,393	31,994		1,000
Owners of the Parent Company
ROS	1.3	10.4%	31.6	20.7%		3.2%
	%		%
ROE	6.8	10.4%	46.8	16.0%		0.5%
	%		%
ROIC	0.7	7.7%	29.6	13.1%		-
	%		%
Capital Investment	6,013	4,282	11,794	24,341		35,000
Depreciation and	8,124	6,647	10,390	18,503		20,000
Amortization
R&D Expenses	2,249	1,482	1,883	2,460		3,000
Interest bearing liabilities	17,048	16,144	49,710	148,030		-
Net D/E ratio	0.0	0.0	0.0	0.5		-
Adjusted Net D/E ratio	0.0	0.0	0.0	0.3		-
Number of Employees	1,980	2,142	2,944	3,714		-
Exchange Rate (JPY/USD)	108.85	112.19	110.43	109.05		106.00

※EBITDA =Operation income + Depreciation + Goodwill amortization

Quarterly Segment Results by Segment

									f=forecast	Millions of yen
				2019					2020
		Q1	Q2	Q3	Q4	Full Year	Q1	Q2	2nd Half		Full Year (f)
Net Sales	68,838	70,338	59,448	63,404	262,028	52,790	40,948	96,262		190,000
	Graphite Electrodes	27,540	29,511	15,971	18,294	91,317	11,460	9,467	16,172		37,100
	Carbon Black	27,308	27,286	25,763	21,391	101,751	21,030	11,600	29,069		61,700
	Fine Carbon	8,296	7,664	7,286	7,122	30,369	7,825	7,718	14,555		30,100
	Smelting and Lining	－	－	4,511	10,151	14,662	6,652	6,248	23,399		36,300
	Industrial Furnaces and	2,212	2,801	3,194	4,432	12,641	3,242	3,147	8,310	14,700
	Related Products

	Friction	2,030	1,886	1,857	1,706	7,480	1,639	1,535	2,925	6,100
	materials
Other	Anode	1,413	1,151	827	269	3,661	903	1,193	1,803	3,900
materials
Operat
Anode
ions	36	36	36	35	144	35	35	28	100
materials
	Anode	3,480	3,073	2,721	2,011	11,286	2,579	2,765	4,756	10,100
	materials
Operating Income	21,226	19,215	8,980	4,922	54,344	6,750	932	283	6,100
Operating Income	15,423	15,917	4,921	3,126	39,388	2,131	609	▲5,222	▲3,700
Carbon Black	3,424	2,262	2,282	542	8,512	1,741	1,850	309	200
Fine Carbon	1,905	1,549	1,463	1,188	6,107	1,919	1,564	2,516	6,000
Smelting and Lining	－	972	272	356	1,600	175	414	1,939	1,700

Industrial Furnaces and	586	762	806	1,072	3,227	868	790	1,740	3,400
Related Products
Other Operations	166	33	82	303	21	242	9	▲234	0
Inter-segment	279	339	304	347	1,270	330	404	▲765	▲1,500
eliminations

Disclaimer Regarding Forward-looking Statements

• Forward-lookingstatements in this document are based on information obtainable at the time this document was published and assumptions as of the date of publication concerning elements of uncertainty that could affect future earnings.
• Actual results may differ substantially, depending on various future factors. Factors that affect business performance include, but are not limited to, economic conditions, trends in product demand and market prices, and fluctuation in exchange rates.
• The quantitative goals, reference values, investment amounts, and other numerical goals in this document only express the medium-term strategy and vision of the company; they are not performance forecasts. The company is not obligated to update such information.
• Please see the disclosures in the Consolidated Financial Results for the official earnings forecast, based on the rules of Tokyo Stock Exchange, Inc.

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