2019 Results SummaryDirection for 2020 For 2020, we are expecting inventory adjustments by steelmakers to resolve excess electrode inventories in the first half of the year, and, despite the high level of uncertainty in global economic conditions, forecasting rising demand for graphite electrodes over the medium-to-long term. To maintain our ability to support the recycling of steel scrap in environmentally friendly electric furnaces, the Company will focus on sustaining its stable-supply capability through ongoing facility renovation investments, and on enhancing product quality in terms of reduced environmental burden per product unit. We anticipate that establishment of an optimal, tri-regional production structure, with facilities in Japan, the U.S., and Germany, and diversified raw material usage and other factors will lower production costs.Tokai Carbon took steps to secure reasonable earnings as economic conditions began to weaken in the U.S. and China in the second half of 2019 and customers held off on purchasing due to surplus inventories. Year-on-year declines for both net sales and operating income were unavoidable due to an insurmountable drop in sales volume. Despite these circumstances, we actively invested to renovate facilities. Going forward, our focus will be on maintaining steady cash flow, and enhancing quality and productivity.Business OverviewGraphite ElectrodesOpportunities and RisksOpportunities• Rise in EAF steel production because of environmental advantages• Greater EAF demand driven by rising scrap volume in China• Projects aiming to boost steel production in India and other countriesBusiness results and forecastKenji EnokidaniGeneral Manager of the Graphite Electrodes DivisionFocusing on Cost Reductions to Boost Market Competitiveness20202018201723,6101,354102,07556,04065,9008,000201991,31739,388060,00030,00090,000120,000040,00020,00060,00080,000Operating incomeNet sales(Millions of yen)(Millions of yen)Forecast(Year)• Sales volume declined year-on-year due to the adverse impact from surplus customer inventories, deceleration of the European economy, and prolongation of U.S.-China trade friction.• Sales prices rose compared to last fiscal year. (ROS of 43.1%)Risks• Lower crude steel production due to global economic weakening• Technological catchup by industry latecomers24TOKAI CARBON ANNUAL REPORT 2019
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