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OSG Procurement's Basic Polices

OSG is the world's largest manufacturer of round cutting tools, with a vast product offering including its world-renowned taps, end mills, drills and rolling dies. Cutting tools are the backbones of the manufacturing industry, supporting the production of a variety of industrial products that are essential to the well being of society.

"Shaping your dreams" is OSG's corporate slogan and commitment to transforming each and every one of our customers' ideas into reality. With this mission in mind, it is our promise to deliver products and services with complete customer satisfaction and to continue to contribute to the advancement of the manufacturing industry.

FY2020 Financial Summary & Future Growth Strategy

The global economy in fiscal 2020 (ended November 2020) deteriorated rapidly due to the effects of lockdowns in many cities and temporary economic activity suspension caused by the COVID-19 pandemic. Although the spread of COVID-19 has bottomed out once, the number of infected cases has surged again recently, leaving the future with uncertainties abound. In Japan, the demand for cutting tools has been gradually recovering since June, but the number of individuals infected with COVID-19 has been raising domestically since October, making the business condition unforeseeable. On the other hand, the yen has appreciated during the recent period of weakness in stock markets. Amid these environments, fiscal 2020 net sales recorded 104.3 billion yen (down by 17.8 percent versus the previous year), operating profit was 8.3 billion yen (down by 57.1 percent versus previous year), ordinary income was 8.9 billion yen (down by 54.6 percent versus previous year), net income attributable to shareholders of the parent company was 5.6 billion yen (down by 58.8 percent versus previous year). In addition, the overseas sales ratio was 59.4 percent (versus 57.3 percent in the previous year).

Fiscal 2020 was the final year of the medium-term management plan "The Next Stage 17." The OSG Group has been steadily increasing its business performance until fiscal 2018 (ended November 2018), but in the second half of fiscal 2019 (ended November 2019), the US-China trade conflict intensified, and in fiscal 2020 (ended November 2020), the COVID-19 pandemic occurred. Under these circumstances, the sales target of 150 billion yen and the operating margin of 20 percent in the medium-term management plan "The Next Stage 17" were not achieved. Unfortunately, the achievement of this goal will be delayed after fiscal 2021 (ending in November 2021). In the medium-term management plan "The Next Stage 17," we have been promoting the "OSG 4.0 Project" with the aim of reforming OSG's manufacturing system. Under the slogan of utilizing IoT to support on-site capabilities, we worked to shorten lead times and to build a profitable production system through ultra-high-mix, small-lot production. On the other hand, large lot production has shifted gear to unmanned production to further enhance production efficiency. In May 2020, we completed the NEO Shinshiro Factory as a factory to realize OSG 4.0, and began production of high-efficiency tools such as carbide taps and carbide drills. In the future, we believe that the "OSG 4.0 Project" can be further accelerated by gradually expanding the efforts at the NEO Shinshiro Factory, which is the mother factory of OSG, to all manufacturing departments. In addition, we have promoted M & A to expand sales channels in the European region and strengthen business for the aircraft industry in Europe and the United States. In the future, we will not only focus on automobile-related industry and aircraft-related industry, but also on markets where growth is expected, such as 5G-related, electric vehicles, and medical care. We will promote customer development with the aim of expanding sales channels in these new markets.

OSG intends to persevere in this era of change by renewing its management structure from fiscal 2021 (ending in November 2021). OSG will continue to aim to be the world's top hole-making cutting tool manufacturer by strengthening its global network, technical and proposal capabilities, as well as by further integration of its domestic and overseas sales, engineering and production divisions.

I would like to express my deepest appreciation to our shareholders and stakeholders. Please look forward to OSG achieving sustainable growth and creating new values for building resilience to help the company thrive in this era of change.

February 2021

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