investor meeting · cemented carbide products the establishment of sales management companies in...

May 14, 2010

President Akihiko Ide

Investor Meeting

Mitsubishi Materials Corporation

135.9

40.0

54.0

33.0

12.6

35.1

100.1

78.768.9

30.0

-9.5

107.1

80.7

50.5

5.0

-66.5

6.1

74.271.358.8

16.3

-80

-60

-40

-20

0

20

40

60

80

100

120

140

FY05 FY06 FY07 FY08 FY09 FY10 FY11(forecast)

3.65.3

6.3 7.5

2.2

-0.5

1.6

-202468

1,424.1

984.7

1,143.6

1,452.1 1,659.2

1,119.4 1,280.0

8001,0001,2001,4001,600

(Unit: billion yen)

（%）

Net sales

ROA

Operating income

Ordinary Income (Loss)

Net Income (Loss)

(Unit: billion yen)

Performance Overview

2

3

1. FY2010 Performance Overview

Net sales ¥1,119.4 billion (down ¥304.6 billion year-over-year )

Operating income ¥12.6 billion (down ¥22.4 billion year-over-year)

Ordinary income -¥9.5 billion (down ¥49.5 billion in year-over-year)

Net income -¥66.5 billion (down ¥72.6 billion year-over-year)

Key points

� Copper prices rose through to the second half of the fiscal year, from 160¢ for FY2010

overall to 250¢ in November (revised) and 277¢ (actual). There was a steady recovery in

auto and semiconductor related demand.

� Substantial cost reductions (¥45 billion) were achieved via the Comprehensive Business

Strategies.

� Earnings in equity of affiliates deteriorated sharply (¥25.7 billion).

� Profits decreased due to reversal of deferred tax assets (¥26.5 billion).

4

2. FY2011 Objectives

This fiscal year has been identified as a period for setting up the

foundation for future growth. To this end, the following strategies

will be implemented.

1) Shifting to a low-cost structure through the continued

implementation of the Comprehensive Business StrategiesFY2010 actual: ¥45 billion

FY2011 projected: ¥12 billion

2) Business restructuring programFY2010 actual: Reorganize nuclear fuel operations, terminate joint

operations for sintered products, convert Mitsubishi Cable Industries

to subsidiary status, consolidate cemented carbide tool subsidiary

plants

FY2011 projected: Split off high-performance (July)

A comprehensive study of competitive advantage in all operations will

be undertaken with a view to building an optimal business portfolio

3) Strategic focus on markets in newly emerging economies

Sales management companies set up in China (Mitsubishi Materials

(Shanghai) Corporation) to promote efficiency improvements and

expansion in China by providing support to Group companies together

with sales and distribution roles.

4) Strengthen initiatives in three growth areas

Identify targets markets for R&D

5

5)Formulate New Mid-Term Business Plan for FY2012

and beyond

Automobiles

Information Electronics

The environment and recycling

Alternative energy sources

Energy saving solutions

Urban resource recycling systems

Hybrid Vehicles

Mobile phones/ organic displays

Solar cells


6

Key points

� Copper prices expected to perform well; strong demand from auto and semiconductor

sectors.

� Further cost reductions under the Comprehensive Business Strategies. Business

restructuring should help loss-making operations to become profitable once more.

� Significant improvement expected in earnings in equity of affiliates; high copper prices to

boost revenue from mining dividends.

Net sales ¥1,280.0 billion (up ¥160.6 billion year-over-year)

Operating income ¥33.0 billion (up ¥20.4 billion year-over-year)

Ordinary income ¥30.0 billion (up ¥39.5 billion year-over-year)

Net income ¥5.0 billion (up ¥71.5 billion year-over-year)

FY2011 Performance Outlook


7

� Due to downturn in private-sector construction investment and ongoing cutbacks in public works investment, domestic demand is estimated at 39 million tons

� Rising fuel costs

Domestic demand (million tons) Exports (million tons)Domestic demand and export sales

Key factors in the business environment

3. Cement

01020304050607080

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10FY11

(for

ecast

)

0

2

4

6

8

10

12

Domestic demand Export sales

Japan

� Boost priority production at Kyushu Plant due to inherent cost advantages (largest domestic plant, close to the sea). Scale down annual production at Aomori Plant from 1,160,000 tons to 480,000 tons.

� Boost exports to growth markets overseas

� Rationalize sales and distribution structures of sales company

� Raise cement prices to maintain adequate revenue levels

� Expand recycling operations

Japan

Net sales/substitution effect (billion yen) Unit waste usage (kg/ton)Net sales from waste treatment

0

5

10

15

20

25

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

(forecast)

30

34

38

42

46

50

Net sales Substitution effect Unit waste usage

3. Cement

8

9

� Cement demand will begin rising in the second half of 2010 as the economic stimulus package takes effect. An annual increase of around 6% is expected.

� Rising growth levels will continue in 2011 and beyond

� Further expansion of the US population will sustain business growth over the medium to long term

Estimated demand for cement(Southern California region)


0

2,000

4,000

6,000

8,000

10,000

'07 '08 '09 '10 '11 '12 '13 '14

Source: 2010 Winter Forecast (PCA)

(Thousand tons)

0%

5%

10%

15%

20%

25%

30%

Sep. '09 Nov. Jan. '10 Mar.

Expressway budget expenditure under the American Recovery and

Reinvestment Act (ARRA)

US average

California

Source: Flash Report (PCA)

U.S.

3. Cement

10

� Cease importing; maintain cement plant operating rates through higher sales to affiliated ready-mix concrete suppliers

� Promote cost reduction via waste treatment and other initiatives

� Reduce fixed costs in ready-mix concrete operations via rationalization of indirect divisions and temporarily shutdowns at ready-mix concrete plants

US population statistics

Source: Population Estimates Program (U.S. Census Bureau)

US total (million) California (million)

260

270

280

290

300

310

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09

32

33

34

35

36

37

38

US total California

U.S.

3. Cement

Copper price

assumption: 6600$/T(300¢/lb)

0

100,000

200,000

300,000

400,000

500,000

600,000

Apri. '09 May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. '10 Feb. Mar.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000LME month and inventory LME cash settlement

USD/mtmt

11

� FY2011 assumptions: copper price = 300¢/lb, exchange rate = ¥90/$

� Continuing steady growth in copper prices

� Increasing pressure on supply of copper ore due to stronger demand from newly emerging economies


3. Metals

Similco (Canada)

MMC rights = 25%,

copper production = 50,000 t

Batu Hijau (Indonesia)

MMC rights = 1.75%,


12

SImilco Mine

� Obtain additional rights at Escondida Mine (May 2010)

� Redevelopment of Similco Mine (June 2011)

� Continue prospecting work in Fiji and Australia

Escondida Mine

Escondida (Chile)

MMC rights = 1.25%,

copper production = 1,080,000 t

Los Pelambress (Chile)

MMC rights = 10%,


Huckleberry (Canada)

MMC rights = 31.25%,


Rights at currently owned mines/prospecting projects

Namosi mine

(Fiji)

In operation or soon to commence operations

Currently prospecting

* Copper production volume: 2009 figures (combined for entire mine)

Cowra and Boowora mines

(Australia)

3. Metals

Mining

13

・Mobile phone recycling (in conjunction with NTT DOCOMO validation trials)� Expand recycling operations

• Processing shredder dust

• Sourcing production materials from appliance recycling plants (particularly air conditioners and televisions)

• Setting up recycling collection, sampling and shipping terminals in the Tokyo metropolitan

Previous initiatives New initiatives

340350360370380390400

FY05 FY06 FY07 FY08 FY09 FY10

MMC recycled material processing volumes(Thousand tons)

Recovery and disassembly of mobile phones

3. Metals

Recycling

• Mobile phone recycling (in conjunction with NTT DOCOMO validation trials)

• Small appliance recycling* Survey of small appliance recycling in Kyoto on behalf of JOGMEC by Corporate Eco-business Division

14

0

400

800

1,200

1,600

2,000

FY09

FY10

FY11

FY12

FY13

FY16

FY21

� Recovery in demand for strip products for automobiles and electronic components

� Mitsubishi Shindoh has entered into a business alliance agreement with SDI (leading supplier of power semiconductor leadframes in Taiwan) to provide non-standard strip materials for power semiconductors used in inverters and other power devices

� Mitsubishi Shindoh has installed new rolling mills at the Sambo Plant, increasing strip production capacity by 24,000 tons per annum and establishing complementary strip production facilities in the east and west

Processed copper

Global market in power devices(Billion yen)

Non-standard strip products

Source: Market in next-generation power devices and power electronics equipment—present and future outlook 2010 (Fuji-Keizai)

NB: FY10 – FY21 figures are projections.

3. Metals

15

3. Advanced Materials & Tools (1)

Cemented carbide products Key factors in the business environment

� Rising demand in China and other newly emerging economies

0

50

100

150

200

250

300

2005 2007 2009

Auto production (indices)

Source: National statistics; standardized to 2005 level = 100

China

India

Japan

Breakdown of demand for MMC cutting tools

Aircraft 4% Auto and

auto parts

57%

Ohter 39%

16

Cemented carbide products

� The establishment of sales management companies in China provides an opportunity to expand sales and distribution networks

� Target net sales: ¥10 billion

0

2

4

6

8

10

12

FY08 FY13-14

Net sales of cemented carbide products in China

Sale

s a

nd S

erv

ice (Billion yen)

Sales network for cemented carbide products in China


: Sales management company (head office, branches)

: Agency/retailer

: Technical Center

Beijing

Shanghai

Guangzhou

Chongqing

Tianjin

17

� Restructuring and optimization of production systems

� Establish increased production capacity

Shift production of certainlines to Thai subsidiary

Boost production capacity of Thai subsidiary

� Identify new markets outside the auto industry

- Aircraft

- Energy generation

� Enhancing technical service capabilities

Machining Technology Center opens in Japan (April)

Providing customer technical services from

facilities in Japan, China and Europe

Machining Technology Center

Pro

duction

Sale

s a

nd S

erv

ice

Cemented Carbide products


18

� Delayed recovery in aircraft and gas turbine demand

� Division split off in July (MMC Superalloy Co., Ltd.)

� Surplus anticipated during current fiscal year on the back of improved earnings capacity through fixed costs reduction

Alloy products

Sintered components

� Making business units in Japan and Malaysia into consolidated subsidiaries to focus on trade with Japanese manufacturers.

� Recovery in auto demand combined with productivity improvements will generate a surplus

-15-10

-505

10Profit/loss for sintered components division (Ordinary Income)

FY07 FY08 FY09 FY10 FY11 (forecast)

* Japan and Malaysia only


19

Monocrystal

(SUMCO)

Polycrystalline silicon

Polycrystalline silicon Key factors in the business environment

Demand tending towards recovery, particularly in Europe

Semiconductor demand tending towards recovery, particularly in 300-mm wafers

3. Electronic materials and components (1)

Semi

conductors

Solar cells

Demand estimates for polycrystalline silicon

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0

100

200

300

400

Semiconductor type Solar cell type

Solar cells type (Thousand tons)Semiconductor type (Thousand tons)

(Estimates prepared by MMC)

550

1,300

1,500

4,000

6,700

6,500

MMC group Company A Company B

Company C Company D Company E

Company F

Total global production capacity

23,550t/year

20

� Use high-purity refining technology to boost sales, particularly in the semiconductor sector,

where the recovery is much stronger

� Yokkaichi No. 2 Plant (annual production capacity 1,000 tons) to commence operations in

the second half of the fiscal year

� Aiming to be a world-class supplier of polycrystalline silicon to the semiconductor industry

Polycrystalline silicon

Yokkaichi Plant No. 2 (under construction)

3,000t(after production capacity increase)

13% market share

Industry breakdown of semiconductor polycrystalline silicon production levels

Estimates prepared by MMC


21

� Sales of semiconductor precision mounting materials (low alpha solder) will be boosted by the

recovery in semiconductor markets together with rising demand for more powerful

semiconductors designed for increasingly compact IT devices

Advanced materials

Semiconductor chip

Heat shield coated film

� Rising demand for hybrid vehicles

⇒ Strong sales of DBA substrates

and heat shield coatings

Solder bump

DBA substrates


22

� Shifting to a low-cost structure through the Comprehensive Business

Strategies

� Promoting business restructuring

� Strategic focus on markets in newly emerging economies

� Identifying priority fields for research and development

� Formulating a new Mid-Term Business Plan

The strategies outlined above will take the company to a strongly profitable position within the current fiscal year while laying down the foundations for strong future growth

Conclusions

Corporate Communications and IR Department,

Mitsubishi Materials Corporation

1-3-2, Otemachi, Chiyoda-ku, Tokyo 100-8117, Japan

These projected performance figures are based on information available to

the Company’s management as of the day for releasing this material. There

are many uncertain or risk factors inherent in projections, and there might be

cases in which actual results materially differ from projections of this material.

For further information, please contact at:

TEL : +81-3-5252-5206 FAX : +81-3-5252-5272

URL :http://www.mmc.co.jp/corporate/en/index.html

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