KURARAY CO.,LTD.

As business performance dependence on growth fields such as automotive, electric/electronics, environment, and medical increases, shifts in industry standards, shorter product lifecycles, and intensifying global development competition may force the reduction or withdrawal of important businesses. This could result in the recording of large-scale losses such as impairment losses on fixed assets. The Group is addressing this through a diverse business portfolio and the promotion of digital transformation, but depending on the speed of environmental change, there is a possibility that the response may not keep pace.

The main raw materials for chemical products, synthetic resins, and synthetic fibers are petrochemical products such as ethylene, which are directly affected by fluctuations in crude oil and natural gas market conditions. If market fluctuations exceed expectations, delays in passing costs on to product prices could adversely affect business performance. In addition, in response to the risk of raw material procurement difficulties arising from supplier accidents/disasters, logistics disruptions, economic sanctions/regulations, etc., the Group implements long-term purchase contracts, secures multiple suppliers, and implements priority-based risk reduction measures based on its BCP.

With overseas sales exceeding 70% of total sales amid global business expansion, geopolitical risks are rising due to the situations in Russia/Ukraine, the Middle East, and heightened tensions in East Asia, which could lead to demand slowdowns, supply chain disruptions, and sharp increases in raw material/fuel prices or procurement difficulties. Large-scale infectious disease outbreaks, trade wars, and unexpected changes in laws, regulations, or tax systems could also adversely affect business performance. The Group has built a risk information collection and analysis system through regional companies established in eight countries including the U.S., Germany, and China, to respond to these risks.

If information systems are disrupted due to cyberattacks, unauthorized access, disasters, etc., or if corporate or personal information is leaked outside the company, business activities may stagnate and credibility may decline, adversely affecting business performance. As a priority issue for FY2025 (ending March 2025), the Group is promoting improvements in the detection accuracy of the mass-download detection and automatic suspension system introduced in FY2024 (ending March 2024), as well as the development of confidential information management systems at overseas Group companies. The Group continues to implement a globally unified information security system and thoroughly enforce confidential information management rules.

The Group operates large-scale chemical plants in Japan, Europe, North America, Asia, and Australia. If a serious safety accident such as an explosion, fire, or hazardous substance leak occurs, it could result in personal and material damage to employees and third parties, damage to business assets, and long-term production suspension. The global PSM audit team formed since FY2022 (ending March 2022) conducted on-site audits at four production sites in FY2025 (ending March 2025) to identify issues and recommend improvements, among other global safety risk reduction measures. There is also a risk of adverse effects on product supply due to accidents or disasters at suppliers.

The Group supplies numerous products that play an important role in the quality of final products such as automobiles, electric/electronic materials, medical products (dental materials, etc.), and food packaging (EVAL, PLANTIC, etc.). If a large-scale product recall occurs due to a quality defect, losses such as damages not covered by product liability insurance may arise. There is also a risk of loss of customer trust and social credibility. The Group strives to improve quality through the introduction and operation of quality management systems at each manufacturing site.

As the Group operates globally, it is subject to various laws and regulations in each country, and future significant changes or tightening of regulations could lead to new compliance costs or constraints on business activities. If a serious legal violation occurs (such as an antitrust law violation), it could result in damages liability and fines, as well as adverse effects on business performance due to loss of social credibility. The Group has established and operates a global compliance program including periodic review of antitrust compliance guidelines, guidelines on contact with competitors, and seminars for officers and employees.

If environmental pollution occurs due to unexpected accidents or natural disasters, or if environmental regulations are tightened, business activities may be restricted and countermeasure costs may increase, adversely affecting business performance. The Group is advancing the evaluation and strengthening of measures against the risk of severe disasters caused by climate change, and has expressed support for the TCFD recommendations while promoting global warming countermeasures such as GHG emission reductions. The Group also continues to work on environmental improvements such as reducing chemical substance emissions and effective use of resources.

With overseas sales exceeding 70% of total sales, export prices are affected by exchange rate fluctuations in domestic production/overseas export businesses, while procurement/sales prices and the value of foreign-currency-denominated assets and liabilities are affected in overseas production/sales businesses. If exchange rate fluctuations exceed expectations, business performance may be adversely affected. The Group takes risk mitigation measures such as forward exchange contracts, but complete hedging remains difficult.

Against the backdrop of a declining working-age population due to the falling birthrate and aging society, as well as increasing labor market fluidity, if the Group is unable to secure necessary human resources due to recruitment difficulties or talent attrition, business activities may stagnate and adversely affect business performance. The Group strives to retain and develop employees through regular engagement surveys, continuous review of the work environment, HR systems, and compensation, and diverse education and training programs, but intensifying global competition for talent remains a challenge.