Tokuyama Corporation

The Tokuyama Group, which operates coal-fired power plants and consumes large amounts of resources and energy, may be affected in its business performance and financial condition by the introduction and expansion of carbon pricing and by increased costs associated with the shift to non-fossil energy. There is also a risk that, as green procurement preferences grow, products and services that lag in decarbonization efforts will become less favored in the market. In response, the Group has set a target of achieving carbon neutrality by fiscal year 2050, aims to reduce GHG emissions (Scope 1 and 2) by 30% by fiscal year 2030 compared to fiscal year 2019, and continuously monitors policy and market trends through a working group under the Environmental Countermeasures Committee.

The Group procures raw materials and fuel necessary for production from around the world, and since some products use special raw materials with limited sourcing options, soaring market prices or supply tightness due to resource nationalism, along with sharp increases in manufacturing costs, could significantly affect business performance. In addition, competitors exist worldwide, and there is a risk that the influx of low-priced competing products and prolonged price competition could reduce profitability. In response, the Group is pursuing stable procurement through a combination of medium- to long-term contracts and spot purchases, securing multiple supply sources, and examining alternative raw materials and supplies.

If product competitiveness is lost due to changes in market needs, marketing failures, the emergence of new competitors, delayed response to rapid technological innovation, or delays in overseas expansion, this could significantly affect business performance and financial condition. In particular, the advanced materials field carries risks of technological obsolescence. In response, the Group is formulating and refining business plans that can respond to market fluctuations through continuous market research and strengthened information exchange and relationships with customers.

Cyberattacks, system failures, or disruptions during the introduction or modification of IT systems could halt business processes such as production, sales, R&D, and accounting, potentially causing serious impacts on business continuity. In addition, the leakage of new technologies and know-how to outside parties could damage social trust and result in the inability to recover R&D investments. In response, the Group has installed core systems in highly secure data centers, conducts regular backups, and has strengthened its early detection and response system through a dedicated cybersecurity organization.

If borrowing or bond issuance cannot be carried out in a timely manner due to changes in the financial environment or external credit ratings, this could significantly affect fund procurement. In addition, since the Group conducts import and export transactions denominated in foreign currencies, fluctuations in exchange rates could significantly affect business performance and financial condition, and also affect the yen-translated amounts of financial statements of overseas consolidated subsidiaries. In response, the Group implements hedging measures such as fixed-rate contracts and interest rate swaps, establishes commitment lines, and balances foreign-currency-denominated assets and liabilities, as well as conducting forward exchange contracts and other hedging transactions.

The Group produces and handles high-pressure gases and hazardous materials, and there is a possibility of health damage due to leaks, fires, explosions, or exposure to harmful chemical substances. In addition, aging production facilities pose a risk of prolonged production stoppages, and if production stoppages or damages compensation occur, this could significantly affect business performance and financial condition. In response, under a policy of prioritizing safety above all else, the Group is improving its safety management level, advancing risk assessments, and promoting daily and periodic maintenance.

With the declining working population due to the falling birthrate and aging population, it may become difficult to secure the human resources necessary for production activities. In addition, if it becomes difficult to secure R&D personnel for advanced materials or personnel to promote DX and cybersecurity, achieving the growth strategy may become difficult, significantly affecting business performance and financial condition. In response, the Group is introducing a job-based employment system, actively hiring experienced personnel, promoting labor and workforce savings through DX, and enhancing work-life balance support programs.

If natural disasters such as earthquakes, tsunamis, or typhoons, fires, explosions, or leaks at production facilities, or delays in raw material and fuel procurement due to ship or rail accidents occur, this could force a significant decline in production volume or a prolonged production stoppage, significantly affecting business performance and financial condition. In response, the Group has established business continuity management (BCM), conducts BCP drills and safety confirmation drills assuming large-scale earthquakes, and carries out daily and periodic facility maintenance.

As the Group exports products worldwide, inadequate compliance with export control laws such as the Foreign Exchange and Foreign Trade Act could lead to criminal penalties, administrative sanctions, and loss of corporate credibility, as well as the risk that products could be diverted for military use, threatening international peace and security. In addition, legal disputes, lawsuits, or compliance violations occurring domestically or overseas could significantly affect business performance and financial condition. In response, the Group has established and enhanced an export control system through a dedicated department, conducts regular security trade education, holds regular Trade Control Committee meetings, and implements preventive measures through the Legal Group and Intellectual Property Department.

Delays in information transmission or inappropriate information disclosure during emergencies could lead to delayed management decisions and impairment of corporate value, and in malicious or serious cases, could even result in delisting. In addition, a lack of succession planning could hinder the development of next-generation leaders, posing a risk of a future decline in the quality of management. In response, the Group has established a Corporate Governance Policy, conducts annual evaluations of board effectiveness by third-party organizations, and ensures transparency and objectivity through the Nomination and Compensation Committee.