KOEI CHEMICAL COMPANY, LIMITED

In the event of an accident at manufacturing facilities or a natural disaster such as an earthquake, volcanic eruption, or tsunami, human and physical damage may occur, potentially affecting business performance and financial condition. As a chemical manufacturing business, the risk of equipment shutdown is directly linked to business continuity. The company works to reduce this risk through regular inspections, seismic reinforcement, BCP drills, and media training.

The company has a high ratio of export sales, much of which is denominated in foreign currencies, so when the yen appreciates, the amount collected from export receivables decreases, potentially adversely affecting business performance. The company appropriately conducts short-term hedging through forward exchange contracts and reduces exchange rate vulnerability by switching to foreign currency-denominated raw material purchases.

If raw material, fuel, and electricity prices rise due to the imposition of carbon taxes or the introduction of an emissions trading system, manufacturing costs may increase, potentially affecting business performance and financial condition. The chemical manufacturing business is energy-intensive and susceptible to the impact of tightened regulations. The company positions greenhouse gas reduction as an important management priority and is actively addressing it.

If a failure occurs in information systems due to cyberattacks or unauthorized access, or if confidential information or personal information is leaked outside the company, this could lead to a decline in competitiveness and social credibility, potentially affecting business performance. The company implements various security measures for its information systems and networks, and is working to strengthen security and tighten its information management system.

Major raw materials such as acetaldehyde and methanol are subject to market fluctuations, and raw material prices, transportation costs, and electricity costs have risen significantly against the backdrop of soaring domestic naphtha prices and the situation in Ukraine. If these cost increases cannot be passed on to product prices, this may have a material impact on business performance and financial condition. The company is monitoring trends in major raw material prices while working to review manufacturing costs and correct selling prices.

The company imports many raw materials from China, and if social unrest occurs in China due to deteriorating political and economic conditions, foreign investment regulations, large-scale disasters, pandemics, terrorism, war, or other factors, this could disrupt raw material procurement and affect business performance and financial condition. The company works to reduce this risk by promoting multiple sourcing and regularly gathering information.

The spread of infectious diseases and epidemics could disrupt production activities, and the impact on the supply chain and stagnation of consumer activity due to restrictions on economic activity could affect business performance and financial condition. The company reviews its guidelines and response manuals as needed according to the infection situation and works to prevent the spread of infection.

In addition to competition with domestic companies, there is a risk that product prices and sales share may decline due to competition from inexpensive overseas products from India, China, and other countries. If the impact of price declines exceeds cost reductions, this may affect business performance and financial condition. The company is promoting plant rationalization and cost reduction through capital investment while focusing on ensuring product safety and quality.

The development and launch of new products is one of the most important priorities, but there are significant uncertainties such as user circumstances and a severe competitive environment, and if progress does not proceed as planned, this may affect business performance and financial condition. The sales and research and development divisions are centrally advancing efforts toward the development and early launch of next-generation new products.

There are risks such as fluctuations in retirement benefit obligations, interest rate fluctuation risk, quality risk related to product defects, litigation risk related to intellectual property and product liability, credit risk related to business partners, and harassment risk, and if these risks materialize, they may affect business performance and financial condition. The company has established individual management systems for each risk to respond accordingly.