Fiscal 2020 Net sales:\225,121(Millions of yen)

(%)

Steel Business

Business results

In the steel industry, demand for steel materials of manufacturing companies fell substantially and the production of crude steel dropped sharply. However, signs of recovery were seen in the second half of the fiscal year. The electric furnace industry continued to face a challenging situation as the price of steel scrap, the main raw material of steel, rose sharply in the second half of the fiscal year, reflecting a sharp increase in demand for steel in China, which had recovered from the COVID-19 pandemic.

Given these circumstances, the Group focused on exports and sales to the construction industry. As a result, the sales amount rose year on year and the Group's net sales increased to ¥75,657 million (up 3.1% year on year). Although the Group implemented cost reductions through emergency measures to raise earnings, operating profit fell to ¥1,293 million (down 68.8% year on year) because improvement in selling prices did not catch up with the steep rise in steel scrap prices.

Net sales,operating income

FY2020 Sales Ratio

Research and development activities

We are developing new shaped steel products and new steel grades, as well as conducting research and development related to quality improvement of rolled products, and environmental improvement such as waste reduction/recycling . As a result, we have achieved orders for new shaped steel products, reduced basic units of existing products, and implemented technological development related to waste reduction and recycling. R&D expenses related to these are 22 million yen.

Issues to be addressed

In addition to maximizing the capabilities of the new steelmaking plant, we have developed our own deformed steel such as mast rails for forklifts and segment components for tunnels, and Japan's first new deformed rebar TACoil. We will strive to expand sales volume by taking advantage of our extensive product lineup.

Automotive and Industrial Machinery Components Business

Business results

In the automotive industry, production decreased worldwide primarily due to sluggish demand and the suspension of factory operations in Japan and overseas in the first half of the fiscal year, although there were signs of recovery in the second half. The construction machinery industry was on a recovery trend as economic activity resumed in China and other regions, and the production of hydraulic shovels remained strong. On the other hand, mining machinery recovered towards the end of the fiscal year but not sufficiently to make up for the poor performance in the first half of the fiscal year.

Given these conditions, the Group cut costs through emergency measures to raise earnings and considered structural reform plans for achieving greater profitability of its businesses that will enable sustainable growth. However, due to a significant fall in sales volume in the first half of the fiscal year, net sales decreased to ¥136,113 million (down 21.8% year on year), and the operating loss stood at ¥221 million (compared to operating profit of ¥1,657 million in the previous fiscal year).

Net sales,operating income

FY2020 Sales Ratio

Research and development activities

We are proceeding with weight reduction that contribute to improved fuel efficiency, research and development related to design improvement, quality improvement, cost reduction, etc., and new product development.

Regarding our main products, steel wheels and aluminum wheels for automobiles, we were able to achieve results such as improving the accuracy of analysis and evaluation technology, developing and mass-producing new products, and reducing the cost and improving quality of existing products.

For construction machinery parts, we conducted research on cost reduction in the manufacturing process of ultra-large wheels and research on quality improvement and cost reduction in the manufacturing process of rollers and shoes for hydraulic excavators.

In addition, we are conducting research on the manufacturing processes of tracks to reduce VOCs (volatile organic compounds) and contribute to the prevention of air pollution.

R&D expenses related to these are 537 million yen.

Issues to be addressed

For automobile wheels, we aim to maximize synergistic effects by optimizing the production system in response to the decline in domestic demand for steel wheels and linking production and sales in response to the expansion in domestic and overseas demand for aluminum wheels.

In addition, we will strengthen the competitiveness of our production bases through priority investment and continuous improvement to capture  expanding global demand and improve profitability. Furthermore, we will promote the development of attractive products in response to the needs of automobile manufacturers for weight reduction of vehicle bodies and the spread of EVs.

Undercarriage parts for construction machinery and ultra-large wheels for mining machinery will further increase customer trust as a global supplier, and will work to build a supply system for growing markets and strengthen/expand the service parts business to achieve growth and stable revenue.

Powers Business

Business results

A challenging business environment continued in the power business due to suppression of coal fueled power generation backed by global warming issues and intensifying price competition. Given these circumstances, the Group worked on the stable supply of electricity in line with its business plan. However, net sales stood at ¥7,583 million (down 18.7% year on year) and operating profit fell to ¥165 million (down 80.6% year on year).

Net sales,operating income

FY2020 Sales Ratio

Issues to be addressed

We will continue to focus on maintaining a stable operating system and supplying electricity through power generation equipment that takes into consideration harmony with the surrounding environment.

Other Businesses

Business results

The Group operated civil engineering and construction business, real estate leasing including Topy-rec Plaza (Minami-suna, Koto-ku, Tokyo) and a sports club, OSSO, and manufactured and sold synthetic mica and crawler robots. Net sales came to ¥5,767 million (down 12.1% year on year) and the operating loss was ¥185 million (compared to operating profit of ¥893 million in the previous fiscal year) due to a fall in sales from sports club operations and sales of mica in cosmetics, which were caused by COVID19.

Net sales,operating income

FY2020 Sales Ratio

Research and development activities

The Technology Center is conducting research and development of basic elemental technologies related to the steel business, automobile/industrial machine parts business, and science business. R&D expenses related to these are 497 million yen.

Issues to be addressed

Synthetic mica, which is the basic raw material for cosmetics, is highly evaluated for its high transparency and safety. We will add color mica of pleasant texture to a wide variety of products and expand sales in Japan and overseas.

The crawler robot is equipped with unique functions such as high-level climbing performance, running on rough roads, forward/backward left/right free running, and automatic running abilities. As an AGV (automatic guided vehicle) that replaces the conventional tire system, we will make a full-scale entry into the market where demand is expected to grow due to labor shortages.