Denka Company Limited

Demand trends for automobiles and electronic components, crude oil and basic petrochemical product market conditions, exchange rate fluctuations, and tariff increases may affect operating results. Under the management plan "Mission 2030," the company aims to make all businesses "three-star businesses" and is strengthening its corporate structure to be less susceptible to changes in the external environment.

Quality assurance activities are becoming more complex due to rapid advances in science and technology, and if quality issues arise with products or services, this may adversely affect business performance and financial condition. In response to the inappropriate conduct related to quality that came to light in 2023, the company formulated the "Denka Response Plan Master Plan," and confirmed the completion of recurrence prevention measures as of the end of March 2026. The company maintains a three-tier quality assurance structure across headquarters, business divisions, and production sites, and continues to work on ongoing quality improvement.

If a major industrial accident or natural disaster such as an earthquake, torrential rain, or large typhoon occurs, it may cause human and physical damage to employees and third parties, damage to production facilities, or production stoppages, which may adversely affect business performance and financial condition. Based on the principle of prioritizing safety above all else, the company is pursuing comprehensive initiatives including qualitative improvement of risk assessment, construction safety management, safety and security education, and safety audits.

The tightening of environmental regulations, such as the emissions trading system that began in fiscal 2026 and the fossil fuel levy expected to be introduced in fiscal 2028, may lead to restrictions on business activities and the burden of compliance costs, which may adversely affect business performance and financial condition. The company has set medium- to long-term targets for achieving carbon neutrality by 2050, and is working to reduce environmental impact through the introduction of in-house renewable energy power generation, development of innovative technologies, and emission reductions throughout the product lifecycle.

In local production and sales operations in Asia, the United States, Europe, and elsewhere, there are inherent risks such as unforeseen changes in laws and regulations, labor relations and personnel recruitment issues, and social disruption due to terrorism or war, and if these risks materialize, they may adversely affect business performance and financial condition. While the company is responding according to conditions in each country and region, it remains difficult to completely eliminate such risks.

If the financial environment deteriorates sharply, fundraising risk and rising interest rates may occur, which may adversely affect business performance and financial condition. The company secures liquidity by maintaining an appropriate level of cash and deposits and through loan commitment agreements with financial institutions, while also reducing interest rate fluctuation risk by fixing interest rates on long-term borrowings.

If profitability declines due to a significant deterioration in the business environment, impairment losses may be incurred on held fixed assets, which may adversely affect business performance and financial condition. The company applies accounting standards related to impairment of fixed assets and continuously monitors changes in the business environment.

In the course of conducting a wide range of business activities, the company may become subject to litigation or other legal proceedings, and if significant litigation is brought against it, this may adversely affect business performance and financial condition. Based on its code of ethics and various internal regulations, the company strives to comply with laws and regulations both domestically and internationally and to maintain and secure social trust.

If an outbreak of COVID-19 or other infectious diseases occurs, business performance and financial condition may be affected by restrictions on activities due to lockdowns, supply chain disruptions, and deterioration of the global economy. The company implements infection prevention measures tailored to conditions in each country at its domestic and overseas business sites, and continues to prioritize the safety and peace of mind of customers, employees, and business partners.

Changes in the situation in Russia-Ukraine and the Middle East may lead to difficulties in procuring certain raw materials, affecting operations, as well as continued sharp increases in the prices of raw materials and fuels such as naphtha, natural gas, and coal, which may affect business performance and financial condition. In accordance with its ESG basic policy, the company respects the movements of the international community and the policies of the Japanese government, while responding appropriately through constructive dialogue with stakeholders.