Tokai Carbon : Q1 FY2023 Earnings Presentation(3MB)

Q1 FY2023

Earnings Presentation

2023/5/12

Table of Contents

Ⅰ Q1 FY2023 Financial Summary

P 3-13

Reference material

P 14-17

Ⅰ

Q1 FY2023

Financial Summary

FY2023 Business Topics (January-March 2023)

• The International Monetary Fund (IMF) announced that, on April 11, 2023, the outlook for global economic growth will fall to 2.8% in 2023, down 0.1% from 3 months earlier. Amid lingering concerns about a recession in the U.S. and economic stagnation in Europe, as financial system instability in the U.S. and Europe and other risk factors are, in principle, not factored in the outlook, the IMF also suggested some downside scenarios, taking into account increasing uncertainty.
• Financial issues such as monetary tightening and subsequent financial system instability have been posing significant downside risks to the global economy. Under these circumstances, the Company recorded significant increases both in net sales and operating income. Net sales increased by 24.5% YoY, operating income increased by 44.8% YoY, ordinary income increased by 40.4% YoY, and net income attributable to owners of the parent company increased by 96.9% YoY. Progress against the 1st half forecasts was steady, with rates of 43.7% for net sales, 57.5% for operating income, 59.0% for ordinary income, and 72.4% for quarterly net income.
• EBITDA, a key indicator measuring cash-based earning capacity, was ¥20.0b (+¥4.4b YoY), up 28.4% YoY, and EBITDA margin was 23.2% (+0.7% YoY), which remains over 20%.
• In the graphite electrode business, recovery is modest due to continued weakness in steel production in some areas, while demand in the U.S. is strong with a focus on large diameter electrodes, backed by a shift to EAF for lower CO2 emissions. Demand in Europe remains sluggish due to macroeconomic deterioration caused by the Ukraine crisis, and competition is intensifying in Japan and Asia. We will build an optimal production system with our global three plants to ensure capturing the opportunities from the reversal of suply-demand situation.
• In the carbon black business, although it was affected by capital investment to meet U.S. environmental standards (e.g., gas scrubbers) and subsequent equipment problems last year, it recovered significantly by capturing strong U.S. demand. Operations were at full capacity at bases in Japan and Thailand with strong global auto and tire production.
• In the fine carbon business, market uncertainty is further increasing due U.S. export restrictions targeting China and a slack in the supply and demand conditions of semiconductors, reflecting concerns over recession in various countries. Demand for high value-added components for semiconductor manufacturing facilities produced at a subsidiary in Korea is decreasing. On the other hand, demand of semiconductors for electric vehicles (EV) and renewable energy remains strong. Rapid growth of advanced driver assistance systems (ADAS) and EVs are supporting the increasing demand for SiC semiconductors that are the core component for the power semiconductor.
• In the Smelting and Lining business, steady global aluminum production and relining demand in aluminum smelters continued to lead to capturing strong graphitized cathodes demand. Amid expectations for resumption of economic activities after ending the zero-COVID policy in China, relining demand in blast furnaces is showing signs of recovery.
• Rating and Investment Information, Inc. (R&I) raised our issuer credit rating from A- (rating outlook: positive) to A (rating outlook: stable) in view of higher profitability and strengthened financial base through the enhancement of our business portfolio.

Tokai Carbon Q1 FY2023 Earnings Presentation 4

Summary of Consolidated Results

• Carbon black and other core businesses were firm leading to YoY increases in net sales and operating income
• Net sales ¥86.5b (+24.5% YoY), Operating income ¥11.4b (+44.8% YoY), ROS 13.3% (+1.9% YoY)

							Millions of yen
		Jan-Mar 2022		Jan-Mar 2023	YoY Change		%Change
Net sales		69,512		86,530	+17,017	+24.5%
Operating income		7,938		11,493	+3,554	+44.8%
Ordinary income		8,406		11,804	+3,397	+40.4%
Net income attributable to		4,044		7,964	+3,919	+96.9%
owners of the parent company
	Group companies (As of March 31, 2023)		Average exchange rates:
		 2022	USD1= ¥116.2
	 Consolidated subsidiaries: 31
	 Equity method affiliates: 1			EUR1= ¥130.39
					 2023	USD1= ¥132.34

EUR1= ¥142.10

Tokai Carbon Q1 FY2023 Earnings Presentation 5