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

November 14, 2022

Toyo Tire Corporation

Consolidated Business Performance

for the Third Quarter of FY2022

(Presentation scripts)

Page2: Highlights of Financial Results for 3rd Quarter of FY2022

Thank you for your continued support.

Allow me to explain our consolidated financial results for the third quarter of FY2022 (3Q/FY2022), followed by our financial results forecast for FY2022 and then some recent topics.

First, I will walk you through the highlights of the financial results for 3Q/FY2022.

I am delighted to announce that we posted record-high net sales both for the 3-month and 9-month periods, owing to the two price hikes in North America, our most important market, after the start of the year and the weakening of the yen.

On the other hand, operating income for the third quarter (Jul-Sep) came in at 5.4 billion yen, as utilization at the U.S. plant lowered, and region/product mixes began to worsen compared to those in 1H/FY2022.

Due to the favorable forex situation, ordinary income amounted to 45.3 billion yen, and profit attributable to owners of parent totaled 44.8 billion yen as we posted a gain on sales of investment securities. They both represent record highs for the first nine months of FY2022.

Meanwhile, we have made a downward revision to our full-year operating income forecast from 50.0 billion yen to 40.0 billion yen.

Dividend per share forecasts remain unchanged at 80 yen for annual payments.

Page3: Financial Results for 3rd Quarter of FY2022 (Jan-Sep)

Here you see the consolidated financial results for the first nine months of FY2022.

Year-on-year comparisons show that net sales grew, but operating income decreased primarily owing to hikes in raw materials and ocean freight costs.

On the other hand, as we posted a forex gain as non-operating income, ordinary income increased. Along with profit attributable to owners of parent, they both topped our records for the first nine-month period.

Page4: Analysis of Operating Income for 3rd Quarter of FY2022 (Jan-Sep) (vs 2021)

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

For the Tires Business, sales factors boosted operating income by 32.9 billion yen, chiefly driven by the top-line growth and price hikes in the North American market. The sum breaks down into 0.6 billion yen for volume effects and 32.3 billion yen for product price/mix effects, the latter of which includes negative 3.5 billion yen in unrealized profit in inventory.

Production cost pushed down operating income by 4.1 billion yen, which is primarily attributable to rising fuel costs and higher labor costs at the U.S. plant.

The ongoing depreciation of the yen added 8.9 billion yen to operating income; however, raw materials, ocean freight, and the Serbia plant startup costs each lowered operating income by 22.0 billion yen, 19.0 billion yen, and 2.3 billion yen, respectively.

As a result, operating income for the first nine months of FY2022 decreased by 8.3 billion yen year-on-year.

Page5: Business Segments for 3rd Quarter of FY2022 (Jan-Sep)

This slide shows net sales and operating income by business segment for the first nine months of FY2022.

The Tires Business experienced positive year-on-year sales growth thanks to brisk sales in the North American market but saw its operating income decline owing to rising raw materials and ocean freight costs.

The Automotive Parts Business, on the other hand, posted year-on-year sales growth, but its operating loss further widened as it was hit hard by soaring prices of raw materials.

To make an early turnaround, we are continually improving profitability at each plant.

Page6: Geographic Area Segments for 3rd Quarter of FY2022 (Jan-Sep)

Here we have net sales and operating income for the first nine months of FY2022 by geographic area segment.

The North America Segment saw sales and income grow year-on-year, attributable to an increase in unit sales and the hike of selling prices. Operating income before royalty payments to the Japan Segment, which reflects the segment's real profitability, recorded positive year-on-year growth.

For the Japan Segment, net sales increased, but operating income decreased, chiefly attributable to soaring raw materials and ocean freight costs.

For the Other Segment, we recorded increased sales and income in Southeast Asia thanks to the smooth transition to the TOYO brand from the SILVERSTONE brand, which helped improve the product mix, and our aggressive efforts to sell priority products.

Page8: Financial Forecast for FY2022 (Jan-Dec)

Next is our latest forecast of the consolidated financial results for FY2022.

As production and sales for the September quarter undershot our forecast announced at the last briefing session. We now base our forecast on more realistic assumptions without being overly optimistic about the prospects from October onward, we have decided to make downward revisions to our previous forecast. Accordingly, we now expect operating income to be

40.0 billion yen, a 10.0 billion yen reduction, ordinary income to be 53.0 billion yen, a 7.0 billion yen reduction, and profit attributable to owners of parent to be 50.0 billion yen, a 3.0 billion yen reduction while maintaining the previous forecast for net sales at 500.0 billion yen.

We also maintain our previous forecast for annual dividends per share at 80 yen.

We assume the yen will depreciate even further from the previous forecast and expect the average exchange rates during FY2022 to be 130 yen against the U.S. dollar and 137 yen against the euro.

Page9: Analysis of Operating Income for FY2022 (Jan-Dec) (vs 2021)

This is a comparison between the revised full-year operating income forecast with the results of the corresponding period of the previous year, complete with an analysis of increases and decreases by factor.

We expect sales factors to push up operating income for the Tires Business by 38.2 billion yen year-on-year, what with price hikes in North America and other markets.

The sum of 38.2 billion yen breaks down into 1.0 billion yen for volume effects and 37.2 billion yen for product price/mix effects, the latter of which includes negative 7.6 billion yen in effects of unrealized profit in inventory.

We expect raw materials cost to lower operating income for this business by 30.0 billion yen, which is attributable to rising prices for petroleum products. Ocean freight is also expected to lower operating income by 23.3 billion yen.

SGA expenses, on the other hand, are expected to negatively affect operating income in the amount of 2.6 billion yen, chiefly attributable to an increase in R&D costs, among others, while the forex factor should boost operating income by 14.4 billion yen due to the yen's depreciation. All in all, we expect operating income for this business to be down by 13.1 billion yen year-on-year.

Page10: Analysis of Operating Income for FY2022 (Jan-Dec) (vs Previous Forecast)

This is a comparison between the latest full-year operating income forecast with its previous forecast, complete with an analysis of increases and decreases by factor.

For the Tires Business, production and sales in the U.S. did not go as expected between July and September, which prevented us from supplying in accordance with changes in demand.

As I mentioned earlier, we now apply more realistic assumptions for production and demand.

As a result, we have lowered our previous operating income forecast by 7.5 billion yen and 3.2 billion yen on account of sales factors and production costs. With raw materials and ocean freight costs factors partially offsetting the decreases, we expect operating income to be 40.0 billion yen, down by 10.0 billion yen from the previous forecast.

Page11: Business Segments for FY2022 (Jan-Dec)

These numbers reflect the latest revisions to our full-year financial results forecast by business segment, shown on this slide.

Net sales for the Tires Business have been revised upward, given the benefits of the yen's depreciation and other factors.

Meanwhile, we have made downward revisions to our operating income forecast by 9.5 billion yen, as production and sales undershot our expectations between July and September. We have lowered our assumptions for production and demand since we expect similar trends in October and thereafter.