Toyo Tire : Consolidated Business Performance for the FY2022 (Script text)

February 14, 2023

Toyo Tire Corporation

Consolidated Business Performance

for FY2022

(Presentation scripts)

Page2: Highlights of Financial Results

Thank you for your continued support.

Allow me to begin by presenting our financial results for FY2022 and our financial results forecast for FY2023.

First, I will walk you through the highlights of the financial results for FY2022.

For the fiscal year ended December 31, 2022, operating income outperformed the forecast that we announced in November last year, reaching 44.0 billion yen, mainly due to raw materials costs being lower than expected.

Meanwhile, ordinary income was below the forecast at 51.0 billion yen, as a result of the recording of non-operating foreign exchange loss in the fourth quarter following the rapid appreciation of the yen.

In a similar vein, profit attributable to owners of parent was below the forecast at 48.0 billion yen, but we have decided to maintain our early forecast for the dividend per share, which is 80 yen for annual payments. On a real-term basis, the dividend payout ratio was 34.5%, which tops our Mid-Term '21 Plan target of 30% or higher.

We expect our net sales and operating income for FY2023 to increase to 540.0 billion yen and 50.0 billion yen, respectively.

Page3: Financial Results for FY2022 (Jan-Dec)

Here you see our consolidated financial results for FY2022.

Net sales hit a record high of 497.2 billion yen, while operating income decreased year-on-year, primarily owing to hikes in raw materials and ocean freight costs.

Ordinary income showed a year-on-year decrease on the back of the operating income decline. Profit attributable to owners of parent, however, reached a record high of 48.0 billion yen as we posted gains on the sale of investment securities as part of the ongoing initiative to cancel cross- shareholding.

Page4: Analysis of Operating Income for the 4th Quarter of FY2022

(Oct-Dec) (vs 2021)

This graph shows the factors contributing to year-on-year changes in operating income for the last three months of FY2022.

For the Tires Business, sales factors boosted quarterly operating income by

4.8 billion yen, chiefly driven by top-line growth and price hikes in the North American market. The sum breaks down into 0.8 billion yen for volume effects and 4.0 billion yen for product price/mix effects, the latter of which includes negative 2.9 billion yen in unrealized profit in inventory.

Production cost pushed down quarterly operating income by 0.5 billion yen, which is primarily attributable to rising fuel costs and lower productivity at the U.S. plant.

The continued depreciation of the yen added 5.5 billion yen to quarterly operating income; however, raw materials, ocean freight, and the Serbia plant start-up costs lowered operating income by 5.9 billion yen, 3.0 billion yen, and 2.3 billion yen, respectively.

As a result, operating income for the last three months of FY2022 decreased by 0.8 billion yen year-on-year.

Page5: Analysis of Operating Income for FY2022 (Jan-Dec) (vs 2021)

Here we compare full-year operating income between FY2021 and FY2022, showing which factor contributes to year-on-year increases and decreases.

For the Tires Business, chiefly driven by top-line growth and price hikes in the North American market, sales factors added 37.7 billion yen to full-year operating income, which breaks down into 1.4 billion yen for volume effects and 36.3 billion yen for product price/mix effects. The latter includes negative 6.4 billion yen in unrealized profit in inventory.

Production cost pushed down full-year operating income by 4.6 billion yen, which is primarily attributable to rising fuel costs and lower productivity at the U.S. plant.

The continued depreciation of the yen added 14.5 billion yen to full-year operating income; however, raw materials, ocean freight, and the Serbia plant start-up costs lowered operating income by 27.9 billion yen, 21.9 billion yen, and 4.6 billion yen, respectively.

As a result, full-year operating income decreased by 9.0 billion yen year-on- year.

Page6: Analysis of Operating Income for FY2022 (Jan-Dec) (vs Previous forecast announced in November 2022)

This graph shows by-factor increases and decreases in full-year operating income compared to our earlier forecast announced in November last year.

Sales factors lowered the full-year operating income of the Tires Business by 0.5 billion yen, which includes positive 0.4 billion yen for volume effects and negative 0.9 billion yen for product price/mix effects. The latter includes positive 1.2 billion yen in unrealized profit in inventory.

Meanwhile, as raw materials prices remained lower than expected and ocean freight was revised, full-year operating income overall outperformed our forecast by 4.0 billion yen.

Page7: Business Segments for FY2022 (Jan-Dec)

Shown on this slide are the full-year results of our net sales and operating income by business segment.

The Tires Business recorded year-on-year sales growth as sales grew in North America and other regions, but its full-year operating income decreased year-on-year, primarily owing to hikes in raw materials and ocean freight costs.

The Automotive Parts Business experienced an increase in net sales, but its operating loss expanded as raw materials costs surged. We are making continued efforts to improve profitability at each plant.

Page8: Geographic Area Segments for FY2022 (Jan-Dec)

Here we have our full-year net sales and operating income by geographic area segment.

The North America Segment recorded year-on-year sales and income growth due to a pick-up in unit sales and price hikes. Segment operating income, excluding royalty payments to the Japan Segment, too, recorded year-on-year growth.

For the Japan Segment, net sales increased, but operating income decreased primarily owing to the hikes in raw materials prices.

For the Other Segment, we improved the product mix in Southeast Asia thanks to the smooth transition from the Silverstone brand to the Toyo brand, but we saw a decline in income as we posted the Serbia plant startup costs in Europe.

Page10: Financial Forecast for FY2023 (Jan-Dec)

Next is our forecast of the consolidated financial results for FY2023.

We expect both net sales and operating income to increase to 540.0 billion yen and 50.0 billion yen, respectively, as we anticipate greater unit sales and a positive impact of price hikes in the U.S. and Japan.

On the income front, however, we expect ordinary income and profit attributable to owners of parent to decrease to 43.0 billion yen and 29.0 billion yen due to the absence of forex gains and gains on the sale of investment securities, which we posted in the previous year.

We expect to pay 55 yen for annual dividends per share.

We assume the yen will appreciate compared to FY2022 and expect the average exchange rates during FY2023 to be 125 yen against the U.S. dollar and 135 yen against the euro.