UBE Corporation

Oversupply resulting from capacity expansion by competitors, or sharp fluctuations in the prices of key raw materials such as benzene, could significantly narrow the price spread between products and key raw materials, potentially adversely affecting business performance. There is also a risk that dependence on raw materials from specific regions or suppliers could make it impossible to secure necessary raw materials in the event of an accident. As countermeasures, the Group is closely monitoring raw material market conditions, promptly passing on costs to product prices, and reducing capacity or withdrawing from unprofitable businesses.

Sluggish growth in sales of internal combustion engine vehicles, a decline in public works projects, and suppression of capital investment due to decarbonization could reduce orders, shipments, and service provision. There is also an inherent risk of a decline in global sales due to economic slowdowns in various countries, trade friction, the situation in the Middle East, and the rise of competing manufacturers. The Group is working to stabilize its earnings base by expanding its After-Sales Service business and strengthening its response to growth markets such as carbon neutrality and EV adoption.

Cost increases are expected due to tightening regulations such as the emissions trading system starting in FY2026 (ending March 2026) and the fossil fuel levy scheduled for introduction in FY2028 (ending March 2028), while delays in responding to the decarbonization transition could lead to a decline in stakeholder evaluation and sluggish product sales. Risks of damage to manufacturing facilities and disruption of logistics networks due to the increasing severity and frequency of natural disasters are also rising. The Group has established the Committee on Global Environmental Issues and is focusing on promoting energy conservation, maximizing the use of renewable energy, and reducing GHG emissions.

Chemical product manufacturing plants use a wide variety of high-pressure gases and hazardous materials in large quantities, and equipment failure, human error, or natural disasters could result in large-scale explosions, fires, or leaks. In the event of an accident, in addition to serious impacts on the lives, property, and environment of employees and local residents, business performance could be seriously affected by opportunity losses from production stoppages and compensation to customers and local residents. The Group is working to prevent accidents through the establishment of the Environmental Safety Committee, implementation of risk assessments such as HAZOP, and the promotion of smart factories utilizing DX.

If business systems or plant control systems are shut down due to increasingly sophisticated cyber attacks, business performance could be adversely affected by the suspension of production activities, leakage of important information, damages claims, and loss of trust. In addition to establishing the Information Security Committee, building a CSIRT framework, and conducting 24/7/365 incident monitoring through an external SOC, the Group is also working to improve security across the entire supply chain. IT-BCP development and drills, as well as security education for all officers and employees, are also conducted on an ongoing basis.

In overseas operations, which account for approximately 55% of consolidated net sales, there are inherent risks such as deterioration of political and economic conditions overseas, war, conflict, and terrorism, tightening of foreign investment regulations, and changes in economic and trade policies, and should these risks materialize, business performance could be adversely affected. The Group has production, development, and service bases in Asia, North and South America, Europe, and other regions, so the scope of impact from geopolitical risk is extensive. The Group has established a framework for information gathering and information sharing with local offices centered on the Overseas Crisis Response Subcommittee, and has built a system to establish an emergency response headquarters in times of crisis, giving top priority to the safety of employees.

Rising geopolitical risk centered on the Middle East region raises concerns about increases in fuel prices such as heavy oil and instability in the procurement environment for petrochemical-related raw materials stemming from naphtha supply constraints, and there is also a risk of procurement route disruption due to war, conflict, or natural disasters. In terms of logistics, rising logistics costs and transportation delays or disruptions due to driver shortages, tightening overtime regulations, and soaring fuel costs could also affect business performance. The Group has established the Supply Chain Management Committee and is taking measures such as diversifying suppliers and production bases, securing appropriate inventory levels, and promoting a modal shift.

If the Group has difficulty acquiring highly specialized talent or if key personnel leave the company, this could adversely affect corporate activities through a decline in innovation capability and the loss of operational and plant operation know-how. There is also a growing risk that inadequate response to human rights issues, including within the supply chain, could adversely affect corporate value. The Group is working to reduce human capital risk through the promotion of diversity, equity & inclusion, improvement of treatment including wages, and the establishment of a human rights due diligence framework.

As the Group has manufacturing and sales bases both domestically and overseas, it is subject to a wide variety of laws and regulations, creating risks such as the incurrence of facility renovation costs when regulations are revised, and, in the event of violations, substantial fines, penalties, restrictions on business activities, and loss of social trust. In recent years, the need for trade management has also increased from a security perspective, and the Group has established the Security Export Control Committee to build a framework for responding to the risk of violating related laws and regulations. The Group is strengthening its compliance framework through the establishment of the Compliance Committee, operation of a whistleblowing hotline (UBE C-Line), and regular implementation of e-learning and training for all officers and employees.

In domestic and overseas corporate acquisitions and capital alliances aimed at business expansion, technology acquisition, and strengthening competitiveness, business performance could be adversely affected by synergies falling short of expectations, unexpected expansion of defects or liabilities, and a decline in corporate value due to deterioration in the performance of investee companies. The Group reduces risk by conducting appropriate market research, due diligence, and careful business evaluation, along with contract negotiations and a thorough internal deliberation process, prior to execution. After completing an acquisition or capital alliance, the Group continues to invest sufficient management resources and conduct appropriate monitoring in order to achieve smooth integration and cooperative relationships.