EuropeJapanNorthAmericaTOKAI CARBON GE LLCLocation: Headquarters - Charlotte North Carolina Plants – Hickman, Kentucky Ozark, ArkansasAcquisition price: ¥14.6 billionProduction capacity: 30,000 tons/yr.Consolidated contribution: Began contributing toconsolidated results in November 2017 Electric furnaces make steel by using graphite electrodes to melt steel scrap. North America is the world’s largest market for electric furnace steel, which accounts for approximately 70% of total steel production there. In November 2017, Tokai Carbon gained a North American production facility when it acquired TOKAI CARBON GE LLC. In so doing, it also established a tripolar global supply system with bases in Japan, the US and Europe. Through its base of operations in the North American market, which is expected to continue steadily growing, the Group will strive to further strengthen the position of its graphite electrodes business in the global market.Business Overview and OutlookIn 2018, net sales rose by 332.3% year on year, to ¥102,075 million and operating income ended the year significantly higher, at ¥56,040 million. Amid a structural downturn, the Company cut its graphite electrode production capacity by about 40% in 2015 and redirected this capacity to the production of anode materials, for which demand was rising. Stricter environmental regulation in China, however, sparked an upturn in graphite electrode demand and the market began to recover in the second half of 2017. At the same time, prices for a key raw material, needle coke, dramatically increased due to short supply, and graphite electrode prices rose as a result. In addition, TOKAI CARBON GE LLC joined the Tokai Group in November 2017, boosting the division to record highs in sales and income for FY2018.Supplies of needle coke and electrodes are expected to remain tight in 2019 and beyond. Our focus will be on securing stable earnings that can be reinvested in updating aging facilities. Attention will also be paid to accelerating optimization and efficiency gains in overall Global Supply System for Graphite Electrodes Business results and forecastProduction Facility Acquired in North America, the World’s Largest Electric Furnace Steel MarketGroup production and sales. This will be done by moving forward with integration of the division’s three globally dispersed business locations.Electric Furnace Steel Production Over the Years66.8%29.2%2008200620142010201220162018(Forecast)(Year)(%)020406010305070North AmericaWorld2019forecast2018201723,6101,354102,07556,040115,40053,200Operating incomeNet sales(Year)(Millions of yen)060,00030,00090,000120,000(Millions of yen)040,00020,00060,00080,000*The 2019 operating income forecast does not reflect internal adjustments.Source: WSA (World Steel Association)23TOKAI CARBON ANNUAL REPORT 2018Vision and StrategySustainability ReportFinancial ReportData SectionBusiness Report
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