Daicel Corporation

Sudden changes in demand in the automotive-related and IC semiconductor/electronic device fields, as well as materialization of geopolitical risks such as tariff policies in various countries including the United States and the situation in the Middle East, could significantly affect both the selling prices and sales volumes of the Company's products. As countermeasures, the Company is working on developing new applications and markets, switching supply to optimal locations, and passing on costs through pricing.

The overseas sales ratio reached 65.6% in FY2026 (ending March 2025), and a stronger yen would adversely affect business performance. According to the Company's estimates, a fluctuation of 1 yen in the US dollar/yen exchange rate results in an annual change of approximately ¥2,300 million in consolidated net sales and approximately ¥700 million in consolidated operating income. Although hedged through forward foreign exchange contracts and other means, complete avoidance is difficult.

Many of the Company's core products directly or indirectly use methanol as a raw material, and fluctuations in supply capacity due to periodic maintenance or equipment failures at suppliers' large-scale facilities affect the methanol market, influencing the profitability of key businesses. The Company strives for stable procurement through long-term contracts with major suppliers, investments in methanol manufacturing companies, and securing multiple procurement sources, while also working to secure profits by passing on market price increases to selling prices.

The total book value of tangible and intangible fixed assets at the end of the fiscal year under review amounted to ¥345,400 million. If significant changes in the business environment prevent revenues from being achieved as planned in investment plans, impairment losses may occur, potentially adversely affecting business results and financial position. The Company seeks to improve the accuracy of investment plans by involving internal and external experts in the investment review process.

As the Company conducts business across a wide range of regions including China, Asia, and Europe/the United States, risks that could impede business development are increasing due to unforeseen changes in laws and regulations, fragility of industrial infrastructure, geopolitical risks such as terrorism and war, and issues related to economic security. The Company is working to mitigate the impact of policy changes in specific countries and other factors through a review of its global supply chain structure.

In the construction, expansion, and renewal of manufacturing facilities, investment amounts exceeding initial plans may occur due to rising construction material prices, labor costs, and exchange rate fluctuations, creating risks of deteriorating investment returns and potential impairment losses through worsening future cash flows. In addition, delays in construction periods due to shortages of construction personnel or delays in procuring materials and equipment could lead to lost supply opportunities. For large-scale investment projects, the Company seeks to reduce the risk of construction delays by arranging in advance for equipment with long lead times.

There are risks of physical impacts on factory operations and the supply chain due to abnormal weather, increased capital investment for reducing GHG emissions, and rising raw fuel and electricity prices associated with the transition to a low-carbon society. In addition, risks of incurring specific GHG emission reduction costs are increasing, such as the mandatory implementation of Japan's domestic emissions trading system (GX-ETS). The Company is addressing these risks through the promotion of energy conservation and the development of carbon-neutral technologies.

There is a risk that internal information could be leaked or tampered with due to unauthorized intrusion by computer viruses, malware, etc., or due to errors by officers and employees. The Company works to reduce this risk by establishing a management system, continuously updating security software and devices, and conducting training for all officers and employees on responding to suspicious emails.

The Company's products are used in a wide range of fields, and if damage caused by a product occurs at a customer or elsewhere, the Company could bear significant liability for damages associated with the recall of final products. The Company strives to establish a quality assurance system and prevent the shipment of defective products, while also maintaining liability insurance in case of an emergency.

If the acquisition and development of management personnel responsible for business strategy and specialized technical personnel do not proceed as planned due to Japan's declining birthrate, aging population, and shrinking labor force, or due to changes in the employment environment at overseas locations, this could have a significant long-term impact on business operations and performance. The Company addresses this through active recruitment of new graduates and experienced personnel, establishment of fair personnel evaluation and treatment systems, and next-generation management personnel development programs.