Resonac Holdings Corporation

The performance of the Semiconductor & Electronic Materials segment is significantly affected by changes in demand for final products such as mobile devices, data centers, and EVs. In addition to product obsolescence and price declines caused by rapid technological changes, and intensifying international competition, there are also risks of soaring raw material, energy, and logistics costs and supply chain disruptions due to geopolitical risk. In response, the Group continuously works to understand customer needs and market trends, develop new products and technologies, and strengthen its supply chain management system.

There is a risk that shrinkage of the internal combustion engine vehicle market due to the shift to EVs, and rapid changes in technology and product requirements accompanying the progress of CASE, may lead to declining profitability and loss of competitiveness in existing businesses. Intensifying competition with competitors and new entrants may cause delays in new technology and product development, which could lead to declines in sales prices. The Group is promoting the expansion of adoption models among existing customers and the development of new customers by providing solutions leveraging its material technologies.

In the petrochemical business, there is a risk that the spread against sales prices may not be secured due to fluctuations in naphtha feedstock prices, an easing of supply-demand balance from large-scale plant construction by other companies, and a sharp decline in demand due to changes in the global economy. In the graphite electrodes business as well, profits may be squeezed by deterioration in the supply-demand balance, and there is also operational risk arising from dependence on production in specific regions. The Group is working to stabilize profits by promoting cost reductions and reviewing sales methods.

A sharp appreciation of the yen weakens the price competitiveness of products exported from Japan to overseas markets, while a depreciation of the yen raises the cost of raw material imports from overseas; exchange rate fluctuations may thus have adverse effects on business results in both directions. In addition, business performance and financial condition are also affected through the translation of overseas group companies' financial statements into yen. The Group strives to minimize risk related to foreign-currency-denominated transactions such as imports and exports through forward exchange contracts and other means.

As a result of the tender offer for Hitachi Chemical Co., Ltd., the amounts of goodwill and intangible assets have increased. If profitability declines due to deterioration of the business environment, or if the fair value of held assets declines significantly, a large impairment loss may occur, which could have a material impact on business results and financial condition. Similar risks may also materialize if expected results are not achieved from corporate acquisitions or capital alliances. The Group strives to reduce this risk through careful due diligence and thorough verification of post-acquisition business integration plans.

A deterioration in financial market conditions or in financial indicators could lead to breaches of financial covenants on borrowings, potentially resulting in early repayment obligations and increased fund procurement costs. If business results and financial condition fall short of expectations, credit ratings may be downgraded, adversely affecting the refinancing of existing debt and the terms of new borrowings. The Group addresses this through securing liquidity via commitment line agreements, leveling out repayment and redemption amounts, and appropriately managing the balance between fixed and floating interest rates.

Prolonged instability in Ukraine and the Middle East, and its potential spillover to other regions, pose a risk of further increases in raw fuel prices and logistics costs. In addition, supply chain disruptions arising from changes in the international situation regarding economic security, unforeseen changes in laws and regulations, and social disruption caused by terrorism or war may hinder overseas business activities. The Group continuously monitors these risks in its business activities in Asia, North America, Europe, and elsewhere.

If damage or information leakage occurs due to cyberattacks on internal systems or manufacturing equipment, this could lead to a decline in social credibility, incurrence of countermeasure costs, and lost opportunities due to suspension of production activities, potentially affecting business results and financial condition. The Group is taking measures to minimize the impact of any incident by establishing global-standard operations through the introduction of world-standard security solutions, and through continuous improvement activities via education and monitoring.

The Group anticipates increased costs from transition risks, including responding to the accelerating tightening of environmental regulations in various countries and the associated capital investment and external procurement of renewable energy, as well as increased costs for addressing physical risks, including preparation for natural disasters. While the Group is promoting measures toward a 30% reduction in GHG emissions (Scope 1 and 2) by 2030 compared to FY2013, delays in responding to customer requirements and increased costs of adapting to stricter regulations could affect business results. The Group is working to strengthen resilience through its endorsement of the TCFD and implementation of scenario analysis, participation in the GX League, and submission of a commitment letter to the SBTi (June 2025).

In aiming to become a world-top-level functional chemical manufacturer, it is essential to recruit, secure, and develop co-creative talent with excellent management and technical capabilities; however, competition for outstanding human resources is intensifying. There is also a risk that reduced efficiency and lower engagement caused by long working hours could have adverse effects both internally and externally. The Group is working to manage human resource risk by improving employee engagement, practicing a co-creative culture, and setting and regularly monitoring KGIs and KPIs.