FUSO CHEMICAL CO., LTD

The Life Science Business operates in the food and industrial fields, and demand may fluctuate significantly due to abnormal weather, natural disasters, or economic fluctuations. The Electronic Materials Business is primarily oriented toward the semiconductor industry, and thus faces the risk of being directly affected by the intense boom-and-bust cycles characteristic of that industry. As countermeasures, the Group is promoting diversification of dependence on specific fields, regions, and users, development of new applications, and strengthening of its financial structure to withstand short-term downturns.

The overseas sales ratio for the current consolidated fiscal year was high at 55.1% (North America 15.8%, Asia 38.4%, etc.), and the Group has five consolidated subsidiaries overseas in China, the United States, and Thailand. Social and economic country risks, personnel and labor issues, and stricter laws and regulations, among other overseas-specific risks, may affect business performance. The Group has established a system for early information gathering and response by dispatching resident staff to each subsidiary and utilizing experts and industry associations.

The Group's raw material procurement is heavily weighted toward China, and changes in China's social and economic conditions could cause procurement difficulties or increased procurement prices, potentially affecting business performance in a specific fiscal period. The Group is considering diversifying procurement to countries other than China, while building a system for early response through strengthening cooperative relationships with suppliers via local subsidiaries. In the event of rising procurement prices, the Group intends to respond through cost reduction, revision of the profit structure, and revision of selling prices.

In addition to the overseas sales ratio of 55.1% and the existence of overseas procurement, exchange rate fluctuations may affect business performance due to the translation of overseas subsidiaries' financial statements and differences between local currencies and transaction currencies. The Group seeks to mitigate foreign exchange risk by adjusting the balance between overseas sales and overseas procurement and by utilizing forward exchange contracts for long-term sales agreements. Since it is difficult to avoid translation risk for overseas subsidiaries, the Group is promoting performance management on a local currency basis and minimizing fluctuation ranges through US dollar-denominated transactions.

In the event of a large-scale earthquake or other natural disaster, or an accident at manufacturing or research facilities, business performance may be affected by damage to production, logistics, information, and research facilities, and supply chain impacts are also anticipated if such events occur at important business partners. The Group aims for the shortest possible recovery through resilience certification acquisition and BCP formulation, while also implementing supply chain surveys to encourage business partners to develop their own BCPs and pursuing multiple-sourcing measures.

The semiconductor industry, the Electronic Materials Business's primary customer base, undergoes intense technological innovation, and if the market changes significantly due to the development and application of new technologies, the competitiveness of existing products may decline. The Group addresses this through constant monitoring of cutting-edge trends and by developing responsive products and building supply systems. In addition, the Group is reducing its dependence on the semiconductor market by developing markets outside semiconductors, such as hollow nano-silica leveraging semiconductor polishing technology and nano-powder for the toner market.

Against the backdrop of growing global interest in environmental issues, chemical regulations tend to be strengthened, and the manufacturing and sale of the Group's products may become subject to regulation under laws and other rules. The Company and its subsidiaries continuously monitor and gather information on domestic and overseas regulatory trends, obtaining advice from experts and industry associations as necessary to respond at an early stage.

The majority of the Group's business is BtoB, and if a problem occurs with a product, the impact could spread through users to products for general consumers, greatly expanding the scope of impact on business performance and corporate trust. The Group is promoting quality assurance activities to reduce defects through process control involving relevant departments and suppliers both in Japan and overseas, by strengthening the quality assurance department structure and explicitly stating quality maintenance and compliance promotion in its code of conduct.

If trade secrets or personal information are leaked due to computer virus infection or unauthorized external access, business performance may be affected by claims for damages from business partners or loss of social credibility. In addition to obtaining ISMS certification in the administrative division and strengthening security through cloud migration, firewall enhancement, and introduction of monitoring software, the Group conducts incident response training and employee education through e-learning.

Response to climate change mitigation measures may limit the range of available suppliers and customers, and global warming countermeasures may increase costs, potentially affecting business performance. The Group has completed calculation of Scope 1 to 3 emissions for the past three domestic fiscal years (FY2021 to FY2023) and calculation of the carbon footprint of major products (FY2024 data completed), and is analyzing the impact of climate change and considering and implementing countermeasures in line with the four pillars of the TCFD recommendations.