midterm plan 2020 briefing · waste treatment: increase cost competitiveness of low-contaminated...

Midterm Plan 2020 Briefing

November 17, 2017

1

To keep moving forward as a valuable

social entity that contributes to

shareholders, customers, employees,

and local communities

2

Introduction

3

To achieve our vision

Pursue sustained growth

Solid financial base

Business portfolio that is resistant to changes in the business environment

Strong and flexible business base

Aggressive investmentGrowth fields and growth regions

▷ Major initiatives were properly pursued

Environmental Management & Recycling- Start of operation of a landfill facility in Myanmar and a new incinerator in SingaporeMetal Processing- Sales expansion in China and Thailand & Launch of electroplating business in Mexico Heat Treatment- Launch of heat treatment business in Mexico- Expansion of heat treatment bases in India

Environmental Management & Recycling - Start of operation of a new incinerator for treating low-contaminated PCB waste- Promotion of commercialization of naturally contaminated soil remediation Nonferrous Metals- Construction of a new roaster at Akita Zinc- Start of operation of PGM's new furnace- Promotion of zinc mine projectElectronic Materials- Expand production capacity and sales expansion of silver powder for solar panels

Electronic Materials- Development and sales promotion of new products such as electrode materials for fuel cells and deep-ultraviolet LEDMetal Processing- Sales expansion of copper alloy and electroplating for smartphones and automobiles

Review of the current Midterm Plan (FY2015 through FY2017)

4

Further expansion of overseas business

Business expansion by entering growth markets and related fields

Continual reinforcement of business competitiveness

Strengthen the business base and aggressively invest management resources for further growth.

Midterm Plan 2020 (FY2018 through FY2020)

5

Evolve into a company equipped with stability and growth potential.

Basic policies

■ Increase competitiveness of existing businesses

■ Expand businesses in growth markets

6

Enhance the earning power of existing businesses by

increasing competitiveness in the mature domestic

markets and improving the functions in the recycling and

smelting complex.

Aggressively invest management resources in markets

for “automobiles,” “information and communication,”

“environment and energy” and “healthcare.”

7

Expand businesses in growth markets 1) Trends

Automobiles Information and communication

HealthcareEnvironment and energy

IoT-related components

Gasoline vehiclesDiesel vehicles

Transition to intelligent vehicles Getting more sophisticated, smaller, and slimmer

Treatment at hospitals

Environmental regulations tightened globally

Shift to green energyShift to preventive medicine and

health promotion

▷The market in each field is expanding with changes.

Growing environmental awareness

Launch new products

Increase capacity

Expand sales

Expand businesses in growth markets 2) Automobiles

Increase in global

automotive production

Increase in EV and

other eco-friendly cars

Evolution into intelligent vehicles

Copper alloy

Electroplating

Metal-ceramics substrates

Heattreatment

▷ Launch new products targeting the evolution of vehicles▷Increase capacity and expand sales in response to market

expansion

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Base metalsRare metals

Applicationof

magnetic materials

Switches, connectors

Capacitors, inductors

Optical sensors

▷ Address ever-changing market needs with high-performance products and strong development capability

Expand businesses in growth markets 3) Information and communication

Transducers

Connecting components

Copper alloy

InfraredLED

GaAssubstrates

Alloy powder

Sophisticated

Lighter

Smaller

Slimmer

Passive components

- Smartphones- Base stations- Servers

Changes in needs for materials associated with evolution of components

9

Expand businesses in growth markets 4)

10

Waste treatment in Southeast Asia

Silver powder for solar panels

Wastetreatment

Environmental management and energyEnvironmental management and energy

HealthcareHealthcare

Silver powder

Deep-ultraviolet

LED

InfraredLED

Launch the second landfill facility and introduce the first incinerator in IndonesiaExpand treatment of hazardous waste in Thailand (landfill/ incineration)Launch businesses in neighbor countries

▷ Promote expansion of existing businesses and launch of new businesses

▷Maintain a large market share with quality advantage and production capacity

▷Develop and commercially produce a new LED designed for healthcare sensors of wearable terminals and for disinfection/ sterilization equipment

● Improve the functions in the recycling and smelting complex

Increase competitiveness in existing businesses

Los Gatos Project in Mexico

● Strengthen businesses in the mature domestic markets

- Start construction and operation

of new zinc mine in Mexico

- Increase collection of materials

for recycling

- Improve treatment capabilities

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Aggressive investment of management resources 1)

Investment (Total for 3 years)

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■Environmental Management & Recycling

- Construction of new facilities in Indonesia- Expand waste melting and recycling

business■Nonferrous Metals

- Construction of new zinc mine in Mexico- Increasing ability to treat impurities in

zinc smelting■Electronic Materials

- Facilities for mass production of new products

■Metal Processing- Increasing copper alloy production

capacity■Heat Treatment

- Construction of new heat treatment plants in India

58.4

82.2

110.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

FY2012-2014 FY2015-2017 FY2018-2020

(Billion Yen) Main items

R&D (Total for 3 years)

Aggressive investment of management resources 2)

13

14.6

17.1

20.0

0.0

5.0

10.0

15.0

20.0

25.0

FY2012-2014 FY2015-2017 FY2018-2020

(Billion Yen)

EnvironmentalManagement & Recycling

Nonferrous Metals

Electronic Materials

Metal Processing

Heat Treatment

Pursue sustained growth

13.8

23.3 20.9

27.2

35.0

42.0

35.0 36.5 36.5

50.0

0

10

20

30

40

50

60

70

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017Estimate

FY2020Estimate

Ord

inar

y In

com

e (B

illion

Yen

)

Environmental Management & RecyclingNonferrous MetalsElectronic MaterialsMetal ProcessingHeat TreatmentOther

14

(Reference) Financial data

15

Midterm Plan 2020 FY2017 forecast

Ordinary income (FY2020) 50 billion yen 36.5 billion yen

Operating income (FY2020) 45 billion yen 34 billion yen

ROE (FY2020) 12% or more 11%

ROA (FY2020) 10% or more 9%

Operating CF (total for 3 years) 120 billion yen 112 billion yen

Investment (total for 3 years) 110 billion yen 82 billion yen

R&D (total for 3 years) 20 billion yen 17 billion yen

Exchange rateMidterm Plan 2020

(Reference)and metal prices FY2017 H1 average

Exchange rate (¥/$) 115 111.1Zinc ($/t) 2,700 2,780

Copper ($/t) 5,500 6,005

Summary of Each Segment

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1. Business strategies- Increase competitiveness of existing businesses to establish a position as No. 1 in Asia and accelerate increase in market share and launch new businesses in each field and region.

- Build the foundation of new businesses that will be the next mainstay businesses in light of global trends in environmental management.

2. Financial dataOrdinary income: 10.0 billion yen (FY2020) Operating income: 10.0 billion yen (FY2020)Investment: 29.4 billion yen (total for 3 years) R&D: 1.4 billion yen (total for 3 years)

3. Major actionsWaste treatment: Increase cost competitiveness of low-contaminated PCB waste treatment.

Expand melting and recycling waste business.Soil remediation: Construct new landfill facility in Japan. Promote naturally contaminated

soil remediation.Recycling: Increase overseas collection of materials for recycling.

Strengthen metal recycling by enhancing the separation facilities.Southeast Asia: Expand waste treatment business by constructing new facilities and

increasing treatment capacity.New business: Promote commercialization of food waste recycling.

Environmental Management & Recycling

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1. Business strategies- Strengthen the business by improving the functions in the recycling and smelting complex.


3. Major actionsPrecious metals and copper: Increase production of tin by Kosaka Smelting & Refining.

Improve treatment capabilities. Platinum metals: Increase collection of resources by expanding overseas bases.

Improve ability to handle difficult-to-treat materials.Zinc: Expand the annual zinc production at Akita Zinc to 220,000 tons

by increasing ability to treat impurities.Strengthen processing plant in Thailand and expand sales inSoutheast Asia.

Resource development: Start construction and operation of new zinc mine in Mexico.

Nonferrous Metals

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1. Business strategies- Launch new businesses, develop new niche/top products, and make them major sources of

earnings.- Expand business domains further to growth markets such as automobiles and healthcare.


3. Major actionsSemiconductors: Develop and mass produce LEDs for healthcare businesses.Electronic materials: Maintain a high market share of silver powder for solar panels.Advanced fine materials: Increase market shares and production capacity for recording

materials, carrier powder, and ferrite powder.New development: Expand sales of deep-ultraviolet LED for healthcare/ disinfection

and increase line of conductive materials.Commercialize new magnetic materials for automobiles.

Electronic Materials

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1. Business strategies- Expand businesses by focusing efforts on automobiles and IoT-related fields.- Increase earning potential further by establishing the business base that is resistant to changes in the business environment.


3. Major actionsCopper rolled products: Increase production and expand sales of copper alloys to meet

growing demand for electric vehicles, intelligent vehicles, and IoT.Enhance the processing businesses in China, Thailand andTaiwan.

Electroplating: Establish a plant in Mexico. Improve competitiveness byoptimizing lines of a plant in Japan.

Metal-ceramics substrates: Expand sales of substrates for trains and automobiles as well asindustrial machinery and develop new products.

Metal Processing

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1. Business strategies- Increase revenues further by taking advantage of the strengths of the current business model.- Pursue initiatives in new business domains.


3. Major actionsIndustrial furnaces: Boost sales of new furnaces in India and North America.

Enhance the manufacturing network in Japan, India, and China.Expand furnace maintenance business and develop new products.

Heat treatment processing: Increase domestic capacity and establish new plants in India tomeet growing demand for automobile-related products.Increase the capacity of plants in Thailand and Indonesia.Promote automation and labor-saving at plants in Japan.

Heat Treatment

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*The earnings forecasts and other forward-looking statements in these materials are based on information currently available at this time and on certain premises that the Company assumes to be reasonable. Actual performance may differ materially from such forecasts due to a variety of factors.

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