Sumitomo Seika Chemicals Company, Limited.

Product groups are exposed to severe price competition due to the entry of domestic and overseas competitors and the influx of low-cost imported products. In particular, in China, the primary market for the Superabsorbent Polymer business, quality improvements by local manufacturers leading to commoditization and declining birth rates may further worsen the competitive environment. As countermeasures, the company is working to strengthen competitiveness through cost reduction, product quality improvement, and new product development, as well as to enhance sales capabilities through market analysis.

Some key raw materials are dependent on specific suppliers, creating a risk that procurement prices for raw materials and fuel could fluctuate sharply due to changes in supply-demand balance, market conditions, or international circumstances. Geopolitical factors in resource-supplying regions, including oil-producing countries, and changes in the international logistics environment may adversely affect procurement costs and terms. The company is working to reduce risk through diversification of suppliers, but complete avoidance remains difficult.

As the company conducts production and sales activities globally, exchange rate fluctuations directly affect foreign-currency-denominated sales and raw material procurement costs. In particular, fluctuations in the Chinese yuan exchange rate may affect business performance, and the yen-converted value of overseas consolidated subsidiaries' results varies depending on the exchange rate used for translation. The company is taking measures to minimize this risk through hedging instruments such as forward exchange contracts.

Due to the intensification of extreme weather events associated with global warming, production facilities located in coastal areas face the risk of production disruption from storm surges and similar events. Responding to tightening GHG emission regulations will require the introduction of renewable energy and modification of manufacturing processes, and the resulting increase in related costs may affect the company's financial position. Furthermore, if the company is slow to respond to changing market values associated with the transition to carbon neutrality, there is a risk of losing competitiveness in products and services.

If a significant deterioration in the business environment or other factors makes it unlikely that investments in held fixed assets can be recovered, the recognition of impairment losses may adversely affect the company's financial position and business results. As impairment accounting standards are applied, there is an inherent risk that sudden changes in the external environment will be directly reflected in financial figures.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the long-term expected rate of return on pension assets and the discount rate. If deviations arise between these assumptions and actual results due to deterioration in the pension asset investment environment, future retirement benefit expenses will increase. A decline in the share price of listed stocks contributed to the retirement benefit trust would similarly be a factor increasing expenses, potentially adversely affecting the company's financial position and business results.

If a natural disaster or an accident originating from manufacturing equipment occurs, it could cause physical and human damage in the areas surrounding the plants, disrupt business activities, and result in significant costs and serious impact on the company's social reputation. The company strives to minimize potential negative factors through regular inspections of all manufacturing facilities, but the impact of external factors such as natural disasters cannot be completely eliminated.

Dependence on systems and networks in business activities is increasing year by year, and if a system failure occurs due to power outages, natural disasters, computer viruses, hackers, or similar causes, business activities could be disrupted, potentially resulting in significant costs and serious impact on the company's reputation. The company works to protect its systems and data through enhanced security measures, but risks associated with increasingly sophisticated cyber threats continue to exist.

In each country where the company conducts business activities, future tightening of legal regulations related to the environment and chemical safety may result in new costs. While the company monitors global regulatory trends and takes necessary measures, depending on the scope and speed of regulatory tightening, there is a risk that compliance costs could affect business performance.

Against the backdrop of a declining working population due to factors such as the falling birthrate, there are concerns about a decrease in the number of new hires and an increase in employee turnover in Japan, the company's primary R&D and production base. If the company is unable to secure the human resources necessary for business operations, or if the development of talent to drive medium-term growth is delayed, this could lead to failure to achieve business plans and adversely affect business results. The company is working on planned talent acquisition based on its talent development policy and on fostering an organizational culture in which each individual can demonstrate their abilities.