Toyo Tire : Financial Results for 1st Quarter of FY2024 (Script text)

May 14, 2024

TOYO TIRE Corporation

Financial Results

for 1st Quarter of FY2024

(Presentation scripts)

Page2: Highlights of Financial Results

Thank you for your continued support.

Allow me to explain our "Financial Results for 1st Quarter of FY2024," followed by our "Financial Forecast for FY2024" and then "Topics."

First, I will walk you through the highlights of our financial results for the first quarter of FY2024.

In the first quarter of FY2024, net sales showed a year-on-year decrease mainly because tire unit sales declined from the corresponding period last year. On the other hand, operating income reached 26.0 billion yen, a record high for the first quarter, which is attributable to favorable external factors, such as the yen's depreciation and lower ocean freight costs, as well as successful sales promotion of priority products.

Both ordinary income and profit attributable to owners of parent hit a record high on a quarterly basis and for the first quarter, respectively, as we posted foreign exchange gains, in addition to the increase in operating income.

Given the current performance trends, we have decided to leave our earnings and dividend forecasts for FY2024 unchanged from what we announced this past February.

Page3: Financial Results for 1st Quarter of FY2024 (Jan-Mar)

Here you see our consolidated financial results for the first quarter of FY2024.

While net sales recorded a year-on-year decrease to 127.6 billion yen, operating income set a record high for the first quarter to reach 26.0 billion yen, primarily owing to our strategy to promote high value-added priority products, the favorable forex situation, and the decline in ocean freight costs.

Mainly because we posted foreign exchange gains, as well as the strong showing of operating income, ordinary income hit a record high on a quarterly basis to 31.9 billion yen, and profit attributable to owners of parent amounted to 23.1 billion yen, a record high for the first quarter.

Page4: Analysis of Operating Income for 1st Quarter of FY2024 (Jan-Mar) (vs 2023)

This graph analyzes the factors contributing to year-on-year changes in operating income for the first quarter of FY2024.

For the Tire Business, sales factors pushed up operating income by 0.2 billion yen. The sum breaks down into negative 5.0 billion yen for volume effects, 7.3 billion yen for improved product price/mix effects, and negative 2.2 billion yen for unrealized profit in inventory.

Production cost pushed up operating income by 0.8 billion yen, primarily attributable to a decline in energy costs. As the yen remained weak, forex rate factors lifted operating income by 3.9 billion yen.

Ocean freight cost factors pushed up operating income by 5.9 billion yen, and Serbia plant start-up cost factors, too, boosted operating income by 1.2 billion yen.

As a result, operating income for the first quarter of FY2024 increased by 11.4 billion yen year-on-year.

Page5: Business Segments for 1st Quarter of FY2024 (Jan-Mar)

This slide shows net sales and operating income for the first quarter of FY2024 by business segment.

The Tire Business recorded a year-on-year decrease in net sales due to lower unit sales but posted an increase in operating income.

The Automotive Parts Business saw a decrease in net sales but successfully eliminated operating loss by enhancing profitability and other measures.

Page6: Geographic Area Segments for 1st Quarter of FY2024 (Jan-Mar)

Here we have our net sales and operating income for the first quarter of FY2024 by geographic area segment.

The North America Segment recorded a net sales increase mainly due to the yen's depreciation.

The Japan Segment posted a decrease in net sales but an increase in operating income.

Page8: Financial Forecast for 2nd Quarter of FY2024 (Jan-Jun)

Given our year-to-date performance trends, we have left both our second quarter and full-year financial forecasts unchanged from our earlier forecasts announced on February 14.

For the first six months of FY2024, we expect our net sales to be 270.0 billion yen and operating income to be 40.0 billion yen.

Page9: Financial Forecast for FY2024 (Jan-Dec)

Next is our consolidated financial forecast for FY2024.

These numbers also remain unchanged from what we announced in February, that is, net sales of 560.0 billion yen and operating income of 78.0 billion yen.

We got off to a better-than-expected start for the first quarter, primarily owing to the improvement in product mix as we focused on the promotion of priority products and the weaker-than-expected yen.

For the second quarter and beyond, we haven't changed our forex assumption of 135 yen against the USD and 145 yen against the Euro, which we announced on February 14. As I speak, the yen is weaker than we anticipated. Together with our strategy of focusing on priority products, which we laid out in the Mid-Term '21 Plan, we perceive this as a great opportunity to further boost our performance.

We are carefully analyzing how the current market conditions impact our sales trends and other key performance metrics. We thus decided not to revise our financial forecasts this time.

Page10: Changes in Tire Production (New Rubber Volume)

This slide shows the tire production volume composition ratio by region.

In the first quarter of FY2024, global rubber production was 4% lower than in the previous year.

On a full-year basis, we expect global rubber production to grow by 2% year- on-year.

Page11: Change in Tire Sales Quantity by Region (YoY)

This slide shows changes in tire sales quantity by region. Each number represents a year-on-year change against the base 100 recorded a year earlier.

In the first quarter of FY2024, global unit sales declined by 14% year-on-year.

Unit sales in the North American replacement tire market decreased by 7% year-on-year.

We haven't revised our sales plan for the rest of FY2024, but we now expect our FY2024 tire sales quantity to be up by 2% from a year earlier, given our performance in the first quarter.

Meanwhile, we are looking at a 4% year-on-year increase in the North American replacement tire market.

Page12: Price Changes in Major Raw Materials

This line graph shows changes in major raw materials prices over time and the impact on our operating income.

In the first quarter of FY2024, price erosion of petroleum products resulted in a year-on-year increase in operating income by 0.1 billion yen, despite a rise in natural rubber prices.

On a full-year basis, we expect prices of both natural rubber and petroleum products to rise, which should push down our operating income by 11.1 billion yen year-on-year.

Page13: Changes in Capital Investment and in Depreciation

Here, you see changes in our capital expenditure and depreciation.

From this time, right-of-use assets are excluded from the figures on the capital expenditure graph.

In the first quarter of FY2024, we spent a total of 5.9 billion yen, which includes capital investment at production sites and for digital transformation (DX).

Meanwhile, depreciation was 8.4 billion yen.

Page14: Changes in Interest-Bearing Debt Balance and Capital Ratio

This slide shows changes in our interest-bearing debt balance and capital ratio.

As of the end of March 2024, our interest-bearing debt balance increased by 7.9 billion yen from the end of the previous fiscal year to 110.6 billion yen.

The capital ratio stood at 63.5%, the debt/equity ratio at 0.26, and the net debt/equity ratio at 0.17.

Page16: Topics: Product Information

Here, we are excited to introduce some of our new products and additions to our existing lineup.

In January 2024, we launched PROXES CF3 that achieves low fuel consumption and superior comfort in Japan, a new addition to our PROXES global flagship tire brand.

This June will see the debut of DELVEX M135, which achieves superior wear resistance to meet the growing needs of light truck tires, catering specifically to the burgeoning small-cargo delivery market.

For the OPEN COUNTRY tire series, our flagship brand mainly targeting SUVs, we are expanding a variety of sizes to meet the growing demand for customizing compact cars and large SUVs.

Page17: Topics: Tires for EVs

Here are our latest offerings for EVs.

Again, for the OPEN COUNTRY series, we have developed the first commercial LTR tires for EVs, which were released in North America this past February.

While retaining market-favorite design elements and superior wear resistance, this EV tire extends the driving range per charge, a breakthrough made possible by our proprietary technology.

In Japan, we are launching tires exclusively for light EV trucks in June.

Light EV trucks are expected to find increasingly diverse applications, and this brand-new tire successfully brought the performance users expect from their tires to a higher dimension.

Closing

That concludes my briefing. Thank you for listening.

(Announced dated May 14, 2024

Presenter: Kiyohito Hasumi, Corporate Officer, Vice-President, Business Headquarters)