Dainichiseika Color & Chemicals Mfg.Co.,Ltd.

The Company supplies products to a wide range of industries including vehicles, information and electronics, building materials, textiles, packaging, and printing, but significant demand fluctuations in specific industries or regions may affect operating results. In particular, the Offset Ink business is expected to face an intensifying shrinking trend in the commercial printing market due to digitalization and the spread of remote work. In response, the Company is focusing on growth areas such as colorants for inkjet inks and pigments for color filters, and is working to improve profitability through the effects of rationalization at the Bando Manufacturing Plant.

Petrochemical derivatives and energy (electricity, gas, etc.), which are the Company's main raw materials, may not only fluctuate in price but also become difficult to procure due to soaring crude oil prices resulting from instability in the Middle East, exchange rate fluctuations, natural disasters, and policy changes. Because it takes time to reflect rising raw material prices in product prices, there is a risk that profitability will be squeezed if the Company prioritizes its responsibility to supply. The Company strives to maintain a stable supply system and secure profitability by always securing alternative suppliers, providing timely information on market trends, and promptly implementing appropriate price pass-through.

At overseas production sites, there are risks such as changes in political systems, changes in laws and regulations, instability in economic foundations, and the occurrence of natural disasters, and if these risks become more serious than anticipated by the Group's crisis management, they could cause significant disruption to production activities. The Company seeks to mitigate risk by avoiding concentration of investment in specific countries and allocating investments appropriately with consideration of risk factors.

As the Company handles a wide variety of chemical substances, laws and regulations related to chemical substance management and environmental management in Japan and overseas continue to be strengthened, and failure to comply could result in penalties, import/export bans, or suspension of production, leading to lost revenue opportunities and the incurrence of remediation costs. There is also a risk of large-scale damages liability arising from product liability. The Company addresses this through enhancement of an independent chemical substance management system, risk control via the introduction of a new chemical substance management system, and the taking out of liability insurance.

The Company manages confidential information such as business partner information, technology, contracts, and personnel matters through information systems, and cyberattacks or unauthorized access resulting in data tampering, information leakage, or system shutdown could adversely affect business activities. In particular, an overseas site actually suffered ransomware damage in FY2026 (ending March 2026), and the risk of being targeted by cyberattacks is relatively high. The Company is deploying measures such as network monitoring, antivirus protection, employee training, and the establishment of a CSIRT both in Japan and overseas.

The medium-term management plan calls for the expansion of overseas business, and as the current overseas sales ratio of 25.7% rises going forward, the impact of exchange rate fluctuations may increase. Export business from Japan and raw material procurement from overseas are also subject to exchange rate effects on individual transactions. The Company currently recognizes that the impact is small, as gains and losses from imports and exports are relatively balanced, and seeks to hedge risk through management of income and expenses in the same currency, local currency borrowings, and foreign exchange forward contracts, among other measures.

As of the end of March 2026, the Company held total short- and long-term borrowings of approximately ¥18.5 billion, and an increase in borrowings due to growth investments and capital expenditures, as well as an increase in interest payments amid rising interest rates, could affect operating results. The financial environment is on an upward trend in both short- and long-term interest rates. The Company plans to mitigate the impact through the use of a cash management system (CMS) and the introduction of long-term fixed-rate borrowings and interest rate swap contracts.

As awareness of decarbonization, resource circulation, and human rights protection grows across the entire supply chain, there is a need to promote sustainability management that meets stakeholder expectations. If the response is delayed, the Company risks losing the trust of business partners and investors, potentially leading to lost business opportunities. The Company is addressing this through strengthened collaboration among technology development capabilities, customer response capabilities, and production site capabilities, as well as through HR strategy and DX promotion.

In response to the global trend of mandating the use of recycled materials, such as Japan's "Plastic Resource Circulation Act" and Europe's "Packaging and Packaging Waste Regulation (PPWR)," there is an urgent need to respond to the increasing use of recycled materials in the automotive plastic compound market, one of the Company's main product areas. If the response is delayed, there is a risk of losing order opportunities from customers. The Company is accelerating its shift toward a circular business model leveraging its long-cultivated "dispersion processing technology" and "compounding technology," and has also participated in the "Do What We Can" consortium since March 2025.

In response to the global strengthening of efforts to conserve biodiversity, there is a need to address the issue of harmful gas emissions from volatile organic solvents (VOCs) during customer use of products such as inks, coatings, surface treatment agents, and Urethane Resin. If the Company fails to respond promptly to tightening regulations or customer requirements, it risks losing sales opportunities or incurring regulatory penalties. The Company conducts analysis of dependence on and impact on natural capital based on the TNFD framework, and is progressively switching from solvent-based products to products with less environmental impact.