TOKAI CARBON CO.,LTD.

Business Details

The largest segment within the Tokai Carbon Group, manufacturing and selling Carbon Black for Rubber Products, Carbon Black for Black Pigments, and Carbon Black for Conductive Applications. Primary customers are tire manufacturers, and the segment supplies globally through domestic (Tokai Carbon head office) and overseas production sites (Cancarb Limited, THAI TOKAI CARBON PRODUCT COMPANY LIMITED, Thai Tokai Carbon Product Rojana Co., Ltd., etc.). This core business accounted for approximately 45.5% of consolidated revenue in FY2025 (ending December 2025), and the company is currently advancing investment in relocating and expanding production sites in Thailand.

Recent Overview

Tire manufacturer production adjustments and increased depreciation from the new Thailand plant led to declines in both revenue and profit year on year.

In Q1 FY2026 (ending December 2026) (January to March 2026), the Carbon Black Business posted revenue of ¥38,730 million (down 0.5% year on year) and segment operating profit of ¥3,235 million (down 28.4% year on year). Although the newly consolidated Thailand subsidiary (consolidated from Q4 FY2025) contributed to results, this was insufficient to offset the decline in sales volume due to tire manufacturers' production adjustments and the increase in depreciation associated with the operation of the new Thailand plant, both of which weighed on profit. The recycling project to regenerate carbon black from used tires and other materials, as well as the Thailand production site relocation project, continue to be advanced.

Key Products

Growth Drivers

• Capacity expansion through the Thailand production site expansion/relocation project (including the acquisition of a Thailand facility from Bridgestone)
• Advancement of a recycling project to regenerate carbon black from used tires and other materials (addressing sustainable demand)
• Medium- to long-term expansion of demand for Carbon Black for Conductive Applications in the EV and battery storage markets
• Continued medium- to long-term capital investment policy for the Carbon Black Business under Vision 2030 (targets of ¥500 billion in revenue, 20% EBITDA margin, and 12% ROIC)

Risks

• Risk of production adjustments and demand fluctuations at major customer tire manufacturers (materialized in Q1 FY2026, ending December 2026)
• Risk of profit pressure from increased depreciation associated with the operation of the new Thailand plant
• Competitive pressure on the U.S. subsidiary from increasing low-cost tire imports from Asia
• Risk of decline in carbon black selling prices (linked to raw material prices and market conditions)
• Construction and operational risks and foreign exchange risk associated with the relocation and expansion of Thailand production sites
• Impact on demand and cost structure from shifts in U.S. tariff and trade policy
• Uncertainty over the global economic outlook amid deteriorating Japan-China relations and heightened tensions in the Middle East

Business Details

A business centered on Specialty Carbon Products, Solid SiC, and SiC-Coated Products, primarily serving the memory and power semiconductor markets. It has an extensive production and sales network domestically (Tokai Fine Carbon Co., Ltd., Oriental Sangyo Co., Ltd.) and overseas (U.S., Europe, China, South Korea). The structure continues in which increased sales volume of Solid SiC Focus Rings for the memory semiconductor market drives revenue, while sluggish demand in the SiC power semiconductor market weighs on operating profit.

Recent Overview

Revenue rose 13.6% year on year, but operating profit fell 19.8% due to weak power semiconductor demand

In Q1 FY2026 (ending December 2026) (January to March 2026), the Fine Carbon Business achieved revenue growth of ¥16,401 million (up 13.6% year on year), driven by an increase in sales volume of its key product, Solid SiC Focus Rings, for the memory semiconductor market. On the other hand, continued sluggish demand in the SiC power semiconductor market caused operating profit to decline to ¥2,264 million (down 19.8% year on year). This pattern of revenue growth accompanied by profit decline has continued from the previous period, with deterioration in product mix weighing on profitability.

Key Products

Growth Drivers

• Increased sales volume of Solid SiC Focus Rings for the memory semiconductor market
• Revenue contribution from the consolidation of U.S. processed graphite companies KBR, Inc. and MWI, Inc. (as sub-subsidiaries)
• Establishment of a framework to address future semiconductor market expansion following the completion of domestic capacity expansion investment
• Positioned as a core segment for "commitment to growth markets" under Vision 2030, promoting capacity expansion and new application development
• Strengthening business efficiency and competitiveness through the reorganization and integration of U.S. processing subsidiaries

Risks

• Sluggish EV-related demand due to slowing growth in the power semiconductor (SiC) market (weak demand continued in Q1 FY2026, ending December 2026)
• Price pressure from intensifying competition in the Chinese market
• Profit pressure from increased goodwill amortization associated with consolidation (goodwill amortization of ¥1,115 million in Q1 FY2026, ending December 2026)
• Risk of fluctuations in the semiconductor market (demand cycles for memory and power semiconductors)
• Risk of deteriorating business environment for U.S. subsidiaries due to changes in U.S. tariff policy

Business Details

A business centered on Cathodes for Aluminum Electrolysis, Blocks for Blast Furnaces, and Carbon Electrodes, etc., supplied to aluminum smelters and steelmakers in Europe and Asia through the Tokai COBEX Group (Germany, Poland, France, China). The company also operates a licensing business for its next-generation, environmentally friendly RuC® (Ready-to-use Cathode), with license fee income from milestone achievements supporting earnings.

Recent Overview

License fee income contributed to a 310.5% year-on-year increase in Q1 operating profit

In Q1 FY2026 (ending December 2026), revenue was ¥14,166 million (up 9.5% year on year) and segment operating profit was ¥658 million (up 310.5% year on year). Although shipment delays occurred for some Cathodes for Aluminum Electrolysis due to instability in the Middle East, earnings were significantly boosted by ongoing cost reduction efforts and the recognition of license fee income from milestone achievements under the next-generation, environmentally friendly RuC® cathode license agreement.

Key Products

Growth Drivers

• Accumulation of license fee income through expansion of the next-generation, environmentally friendly RuC® cathode licensing business
• Improved earnings structure resulting from significantly reduced goodwill and fixed asset amortization following the large-scale impairment recognized in the prior period (¥61,239 million)
• Reduction in cost of sales ratio through continued cost reduction measures
• Strengthened governance and accelerated formulation of fundamental structural reform plans through direct oversight by the Corporate Planning Department and dispatch of executives to European sites
• Potential for increased sales volume should demand for aluminum smelting furnace refurbishment enter a recovery phase

Risks

• Continued risk of shipment delays due to instability in the Middle East
• Sluggish sales volume due to delayed recovery in demand for aluminum smelting furnace refurbishment and continued inventory adjustments by customers
• Price pressure from intensifying competition
• High exposure to European economic slowdown and rising energy costs, given the segment's primary base in Europe
• Risk of delays in executing fundamental structural reform
• Foreign exchange risk (business results are affected by fluctuations in the euro and Chinese yuan, given the segment's operations in Europe and China)

Business Details

A business centered on Graphite Electrodes for Electric Steelmaking Furnaces (EAF), operating globally through the domestic Hofu Plant and a U.S. subsidiary. In 2025, the company completed fundamental structural reform, including the cessation of production at the domestic Shiga Plant and its consolidation into the Hofu Plant, and the sale of shares in the European subsidiary TOKAI ERFTCARBON GmbH (deconsolidated in April 2025). Primary customers are electric arc furnace steelmakers, with relatively firm demand in India and the U.S., while demand remains sluggish in China, the EU, and other regions.

Recent Overview

Revenue fell 16.4% year on year, but operating profit turned positive owing to the effects of structural reform

In Q1 FY2026 (ending December 2026), revenue was ¥7,845 million (down 16.4% year on year), primarily due to the reduction in revenue scale following the deconsolidation of the European subsidiary TOKAI ERFTCARBON GmbH in April 2025. On the other hand, operating profit turned positive at ¥251 million, compared with an operating loss of ¥725 million in the same period of the prior year. While crude steel production in India and the U.S. remains relatively firm, sluggish crude steel production in China, Asia, and the EU, along with a delayed recovery in electrode demand, continues; the fixed cost reduction effect from structural reform supported the improvement in earnings.

Key Products

Growth Drivers

• Reduction in fixed costs and improved cost competitiveness through the completion of structural reform in the Graphite Electrode Business (domestic production consolidation and sale of the European subsidiary)
• Improved operational efficiency through production consolidation at the Hofu Plant
• Demand support from relatively firm steel production in India and the U.S.
• Continued efforts to maximize the effects of structural reform under Vision 2030

Risks

• Continued price pressure and sluggish electrode market conditions due to excessive steel product exports from China to surrounding markets
• Risk of declining sales volume due to sluggish steel production in major regions other than India and the U.S. (China, Asia, EU)
• Changes in customer base due to reduced geographic coverage following the sale of the European subsidiary
• Risk of prolonged decline in capacity utilization and inventory adjustments in the electric furnace steel industry
• Impact of foreign exchange fluctuations (particularly the U.S. dollar) on earnings

Business Details

Primary operating companies are Tokai Konetsu Kogyo Co., Ltd. (domestic) and Shanghai TOKAI KONETSU Co., Ltd. / TOKAI KONETSU (SUZHOU) CO., LTD. (China). The business supplies Industrial Electric Furnaces and Silicon Carbide Heating Elements as its core products to the energy-related and electronic components industries on a build-to-order basis. While strong demand for AI server-related MLCCs and Resistors for Power Infrastructure drove revenue, one-time costs associated with specification changes for large-scale orders already received weighed on profit.

Recent Overview

Revenue rose 11.1% year on year, but one-time costs led to a 30.5% decline in operating profit

In Q1 FY2026 (ending December 2026), revenue grew to ¥2,361 million (up 11.1% year on year), driven by a surge in demand for AI server-related MLCCs and strong sales of Resistors for Power Infrastructure. On the other hand, the recognition of one-time additional construction costs associated with specification changes for large-scale industrial furnace orders already received caused operating profit to decline significantly to ¥327 million (down 30.5% year on year). Capital investment in LiB facilities within the energy-related industry remains sluggish.

Key Products

Growth Drivers

• Expanding demand for industrial furnaces and heating elements from the electronic components industry, driven by a surge in demand for AI server-related MLCCs
• Strong sales of Resistors for Power Infrastructure amid global progress in power transmission and distribution network development
• Positioned as a business expected to grow alongside the semiconductor market under Vision 2030, with capacity expansion and new application development as stated policies
• Capability to serve the Asian market through local production sites in China (Shanghai and Suzhou)

Risks

• Risk of one-time additional construction costs weighing on profit due to specification changes for large-scale industrial furnace orders already received
• Continued stagnation in LiB-related capital investment in the energy-related industry, with an unclear timeline for demand recovery
• Structural risk in which order trends directly affect revenue due to the build-to-order production model
• Potential impact of intensifying competition and geopolitical risk in the Chinese market on operations at Chinese sites
• Risk of delayed recovery in related capital investment due to continued sluggishness in the SiC power semiconductor market

Business Details

A composite segment handling Friction Materials (for construction machinery, mining, motorcycles, industrial machinery, and agricultural machinery), Anode Materials for Lithium-Ion Secondary Batteries, etc., and real estate leasing. Domestically, the business is operated by Tokai Material Co., Ltd., Sanyu Brake Co., Ltd., Tokai Noshiro Seiko Co., Ltd., and KC Kogyo Co., Ltd., while overseas operations are conducted by Tokai Carbon (Suzhou) Co., Ltd. This segment accounts for a small proportion of consolidated revenue, approximately 2.7%. In Q1 FY2026 (ending December 2026), Friction Materials performed steadily for motorcycles, construction machinery, industrial machinery, and agricultural machinery, while anode materials and real estate leasing saw a significant decline in revenue.

Recent Overview

Friction Materials remained firm across multiple applications, but a sharp decline in anode materials caused segment revenue to fall 12.9% year on year

In Q1 FY2026 (ending December 2026), revenue for Other Businesses was ¥2,215 million (down 12.9% year on year) and operating profit was ¥126 million (up 1.0% year on year). Friction Materials grew to ¥2,172 million (up 10.8% year on year), performing well for motorcycles, construction machinery, industrial machinery, and agricultural machinery, while anode materials, real estate leasing, and other items declined sharply to ¥42 million (down 92.6% year on year), significantly pushing down overall segment revenue. Operating profit was maintained at roughly the same level as the prior year, supported by the earnings contribution from Friction Materials.

Key Products

Growth Drivers

• Steady demand for Friction Materials used in motorcycles
• Increased demand for Friction Materials for construction machinery in the Chinese market
• Favorable performance of Friction Materials for industrial machinery and agricultural machinery
• Maintenance and improvement of operating margin through improved cost management

Risks

• Sharp decline of 92.6% year on year in revenue from anode materials, real estate leasing, and other items, with continued risk of sluggish demand for ESS and EV-related anode materials
• Risk of declining demand for mining-related Friction Materials in Southeast Asia, including Indonesia
• Remaining risk of additional impairment related to Friction Materials manufacturing equipment (¥348 million impairment loss recognized in FY2025, ending December 2025)
• Unstable earnings structure in the anode materials business due to dependence on spot demand
• Structure in which Friction Materials account for approximately 98% of segment revenue, resulting in significant impact from deterioration in Friction Materials market conditions