Business Risks

Business risks that may potentially have significant influence on the Daicel Group's business performance and financial position include the following. Items listed below do not necessarily comprise all of the risks related to the business of the Daicel Group.
All forward-looking statements are based on information available as of June 17, 2026.

The market environment can be affected by various factors, such as a sharp decline in demand caused by abnormal economic conditions, or an excess supply caused by such factors as large-scale plants being constructed by other companies. In the automotive and IC semiconductor and electronic device sectors, which are the face-to-face markets of the Group, the market environment is changing rapidly, which has a significant impact not only on the sales price but also on the sales volume of the Group’s products.

Also, a slowdown in the global economy due to the materialization of geopolitical risks, including tariff policies in various countries such as U.S. and the situation in the Middle East, may bring changes to the commercial trends and demand for the Group’s products and those of its customers, thus affecting the Group’s financial results

Fluctuations in the exchange rate affect the terms of trade related to the Group’s import and export transactions, and the results of overseas Group companies’ business performance when converted into Japanese currency.

In general, depreciation of the yen tends to have a positive effect on our performance, while appreciation of the yen tends to have a negative effect on our performance. At overseas Group companies, business performance may be affected by exchange rate fluctuations in foreign currencies different from the company’s home currency.

The Daicel Group’s many core products are made from methanol directly or indirectly. Methanol is positioned not only as a raw material for chemical products, but demand for it as a clean energy source has also been growing in recent years. Meanwhile, suppliers’ production facilities have become larger in scale, and fluctuations in supply capacity due to periodic maintenance, equipment failures and other factors may affect methanol market conditions, posing a risk of impact on earnings in the Group’s major businesses.

The Daicel Group procures raw materials other than methanol, including petroleum-derived chemical products, as well as fuels used as heat sources necessary for plant operations. These raw materials and fuels are also subject to market price fluctuations caused by changes in the supply-demand balance and, in recent years, geopolitical risks, posing a risk of impact on the Group’s earnings.

As the Group continues to aggressively expand its overseas business, geopolitical risks such as unforeseen legal and regulatory changes, vulnerability of industrial infrastructure, difficulties securing qualified employees, and terrorism and war are likely to increase. In particular, there are many cases where the same business is being developed over a wide area in China, Asia, Europe, the United States, etc. Therefore, we believe that there is a risk that business development may be hindered due to economic security issues.

In order for the Group to realize the continuous development of its business, it is important to secure and nurture personnel with excellent management skills who can take charge of management strategies and global organizational management, and to secure diverse personnel who are well-versed in specialized technologies.

However, if the Company is unable to secure and nurture the necessary human resources as planned due to the declining birth rate, aging population, and the declining working population in Japan, as well as changes in the employment environment at overseas bases, it may have a significant impact on the Group’s business operations and results from a long-term perspective.

The distribution environment in Japan is experiencing shortages of transport drivers and stevedores and rising distribution costs due to the declining working population caused by the low birth rate and aging population, in addition to the “upper limit on overtime work” under work style reform-related laws, and there is a risk that the competitiveness of the Group’s products will decline.

The Group focuses on highly functional, high-value-added products, and the number of suppliers is limited because many of the raw materials used in these products have stringent quality requirements and specialized characteristics. As a result, there are risks associated with the procurement of raw materials, such as the need to secure new suppliers and to respond to changes in factors.

With the aim of further business growth, the Group is actively engaged in corporate acquisitions and capital alliances that can be expected to have a synergistic effect on the Group.

If the investment results cannot be obtained as expected, or if there is a significant revision to the business plan due to a sudden change in the business environment and other factors, impairment of goodwill or investment loss will adversely affect the Group’s business performance.

The Group continuously undertakes capital investments for the construction of new facilities, capacity expansions, equipment renewals, safety measures, and productivity and labor-saving initiatives to support business growth. In carrying out these capital investments, actual investment costs may exceed initial plans due to increases in construction material prices and labor costs, fluctuations in foreign exchange rates, and other factors. Such increases in investment costs may reduce investment profitability and, through the deterioration of future cash flows, could result in the recognition of impairment losses.

In addition, if project schedules are delayed beyond the original plan due to shortages of construction personnel, delays in the procurement of materials and equipment, or delays in construction progress, the Group’s business performance could be adversely affected through lost sales opportunities, delays in planned sales, and other factors.

There is a physical risk that abnormal weather due to climate change will affect the operation of the Group’s plants and supply chain, and risks such as an increase in capital investment for GHG emission reduction and rising raw material, fuel, and electricity prices due to an inability to respond to the transition to a low-carbon society may adversely affect the Group’s business performance. We believe that the risk of incurring costs related to specific GHG emission reductions is increasing, including requests from major customers for concrete emissions reduction results and the mandatory introduction of the Emissions Trading System (GX-ETS) in Japan. The Group is also developing technologies that contribute to carbon neutrality, including technologies for converting carbon dioxide into raw materials for chemical products.

Due to increasing social demands for environmental protection, environmental regulations are becoming more stringent. The environmental impact of chemical substances contained in our products has also become a growing focus of attention, and environmental regulations may affect sales and adversely impact the Group's business performance.

In the event that significant damage is incurred from a natural disaster, the Group’s business performance may be adversely affected. In particular, one of the Group’s primary manufacturing facilities, the Fuji Plant, is in a region that requires enhanced countermeasures for disaster prevention related to an anticipated Tokai earthquake. Also, if a massive earthquake such as a Nankai Trough earthquake occurs in various regions, there is a risk of damage to the Group’s plants along the Seto Inland Sea and a significant impact on the logistics of raw materials and products.

When serious infectious diseases such as pandemic influenza or coronavirus spread, economic activities may be restricted to prevent the spread of infection, and a large number of people may be affected in the Group or among business partners. In such a situation, plant downtime, production stoppage, and supply chain disruption may occur, which could adversely affect the performance of the Group. Countermeasures

Damage to the customer caused by products manufactured by the Group may adversely affect the Group’s business performance. The Group’s products are used in a variety of industries, so that there may be significant liability if the final product is recalled.

The Group is a chemical company, and in the event of an industrial accident such as a fire or explosion at a plant, or a workplace accident at a plant causing serious harm to the life or health of workers, the Group’s business performance could be adversely affected due to suspension of operations, damages compensation or other factors.

The Group is actively conducting research and development activities to strengthen existing businesses and create new ones. However, as the pace of technological innovation continues to accelerate, there is a risk that the invested R&D costs may not be recovered if new products cannot be developed as planned or if such products cannot be successfully commercialized.

Based on the Ethical Standards of Daicel Group, “We carefully safeguard the Group’s intellectual property rights and prohibit any actions that would infringe upon the rights of others,” the Group strives to adopt a strategic approach, including the investigation of IP-related information, the acquisition and management of IP rights, as well as to the conclusion and management of appropriate IP-related contracts. However, it is possible that the Group may be subject to an unexpected warning or litigation related to infringement of third-party IP rights, or a third party may infringe the Group’s IP rights without permission. Any of these cases could adversely affect the Group’s business performance

The Group strives to comply with domestic and overseas laws, regulations and contracts. However, while conducting business globally and in various fields, there is a risk of being subject to lawsuits, disputes, and other legal procedures, and we may thus be subject to significant litigation.

If an adverse decision or judgment is made in litigation or other legal proceedings, the Group’s operating results may be adversely affected.

There is a risk that in-house information may be leaked or falsified due to a fault in the communications network, a malfunction or defect in the hardware or software on a network or computer system, or a criminal act such as external intrusion into a computer system through unauthorized means such as computer viruses or malware, or an error of an officers and employees or contractor.

Human rights risks have become very important in recent years, and the Group believes that respect for human rights should not only be strictly enforced within the Group, but should also be sought outside the Group. Securing human rights in supply chains, particularly in emerging countries, is particularly important. If human rights violations or child labor are confirmed, risks related to delays in raw material procurement and production activities may become apparent.

With respect to the machinery and equipment, land and buildings used by the Group or loaned to third parties, there is a potential risk of impairment due to a decline in asset value, such as the inability to earn profit as planned or the expected recovery of investment.  As of the end of the fiscal year ended March 2026, the total carrying amount of property, plant and equipment and intangible assets was 345.4 billion yen, and there is a risk of impairment due to a significant change in the assumed business environment. Impairment losses on fixed assets could adversely affect the Company’s operating results and financial position.