TOYOBO CO., LTD

There is a risk that business activities may be suspended or reduced due to natural disasters such as a Nankai Trough earthquake, fire or leakage accidents, or the outbreak of infectious diseases. In light of the fire accidents at the Tsuruga Plant in 2018 and the Inuyama Plant in 2020, the company has been advancing the development of BCP guidelines and the acquisition of ISO45001 certification (at 4 sites); however, if events exceeding expectations occur, they could have a material impact on production and supply.

There is a risk that changes in U.S. trade policy, armed conflicts in the Middle East, and heightened geopolitical tensions could lead to reduced production and sales, logistics disruptions, and sharp increases in energy prices. If such impacts become prolonged, impairment losses on fixed assets or reversal of deferred tax assets may occur, and in the event of the bankruptcy of major business partners due to an economic downturn, there is also a risk of credit losses significantly exceeding the allowance for doubtful accounts.

Petrochemical products such as polyester, nylon, and polyolefin resins are key raw materials, and there is a risk that securing the necessary quantities may become difficult due to natural disasters or supply chain disruptions. Surges in purchase prices caused by crude oil price and exchange rate fluctuations may also affect production and sales. While the company addresses this through diversification of suppliers, multi-vendor purchasing, and promotion of green procurement, complete avoidance of the risk is difficult.

If quality or safety concerns arise in automotive safety components such as airbag base fabrics or in the pharmaceutical contract manufacturing business, this could affect customers' lives and lead to product recalls, substantial damages claims, and loss of credibility. Although the company holds product liability insurance, it may not fully cover the amount of damages. Regarding the UL certification issue, re-acquisition for two products remained incomplete as of the end of March 2026.

The risk of information security breaches originating from increasingly sophisticated and diversified cyberattacks, as well as from overseas sites and outsourcing partners, is rising over the medium to long term. If unauthorized access or information leakage occurs, it could result in the suspension or delay of business activities, leakage of customer information, and substantial costs and damages claims. The company has established TOYOBO-CSIRT headed by the CISO, and has developed information security policies and continuously reviews countermeasures; however, complete protection against attacks exceeding expectations cannot be guaranteed.

The business environment is becoming increasingly complex due to the tightening of environmental and climate change regulations, growing demands for compliance with human rights and supply chain-related laws, and the introduction of export controls and sanctions against a backdrop of economic security concerns. Tightened regulations may require substantial capital investment and cost burdens, and any compliance violations could result in administrative sanctions, fines, damages claims, and loss of credibility, in addition to reputational damage. The company is strengthening its response through measures such as multilingualizing its internal whistleblowing system and comprehensively revising its compliance manual.

Both physical risks—such as the suspension of business activities due to natural disasters like typhoons and torrential rains—and transition risks—such as increased costs from GHG emissions and fossil fuel use due to the introduction of carbon pricing—exist. Based on the TCFD recommendations, the company conducts climate change scenario analysis to identify financial impacts and set countermeasures, indicators, and targets; however, depending on the progress of regulatory tightening, there is a possibility of a material impact on business costs.

As the company imports some raw materials from overseas and exports some products overseas, significant short-term exchange rate fluctuations may affect business performance, particularly for products with long manufacturing lead times. In addition, since the results of overseas consolidated subsidiaries and equity-method affiliates are translated into yen, there is a risk that a stronger yen could reduce shareholders' equity through foreign currency translation adjustments. While the company seeks to mitigate this risk through forward foreign exchange contracts and other measures, complete avoidance is difficult.

There is a risk that impairment losses may need to be recognized for business-use fixed assets such as factory land, buildings, and manufacturing equipment if profitability declines significantly due to changes in market conditions or technological developments, or if land market values fall. During the current consolidated fiscal year, the company recorded impairment losses totaling ¥0.38 billion on assets scheduled for disposal or idling and on business-use assets, and additional impairments may arise in the future due to deterioration of the business environment.

Due to the declining working-age population associated with the falling birthrate and aging population, as well as changes in employment conditions, if it becomes difficult to secure and develop highly specialized personnel or leadership talent as candidates for future executive positions, this could result in a decline in organizational competitiveness and stagnation of business activities. The company is working on developing next-generation management talent, training for career-track hires, promoting women's participation, employment of persons with disabilities, and LGBTQ+ initiatives; however, the effectiveness of these measures may be limited due to intensifying competition in the labor market.