Investor Relations / Management InformationBusiness 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 26, 2023.

Market Risks

  1. 1Risks from Extreme Market Fluctuations
    In the event of drastic decline in demand caused by abnormal economic conditions, an excess supply caused by such factors as large-scale plants being constructed by other companies, or lower prices of the Group's products due to intensified competition among competing companies, etc., there is a chance that Daicel's income from its businesses could deteriorate.
    The Group's products are supplied to various fields. In particular, fluctuations in demand in industries such as automobiles, electric appliances, semiconductors, and medicine have a major impact.
  2. 2Trends in Currency Exchange Rates
    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 has a positive effect on our performance, while appreciation of the yen has 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.
    Though the Company executes exchange contracts and otherwise hedges foreign currency risk, these activities are not able to eliminate all the risk and there is a possibility that our operating results and financial position may be adversely affected.
    The Company's ratio of overseas sales to consolidated net sales is on the increase (62.7% in the fiscal year ended March 31, 2023). According to our calculations, a 1-yen change in the US dollar/yen rate will change annual sales by approximately 2.4 billion yen and consolidated operating income by approximately 900 million yen.
  3. 3Fluctuations in Raw Material (Methanol) Prices
    The Daicel Group purchases a large volume of methanol, a raw material used in core products, such as acetic acid and polyacetal. We apply mechanisms to regularly purchase methanol at a relatively low price, such as entering long-term contracts and investing in methanol producing companies. Upswings in the methanol market may negatively affect Group performance.
  4. 4Fluctuations in Other Raw Material Prices
    To combat raw material and fuel price increases, the Daicel Group has been switching to raw materials and fuels that are less expensive and more stable in price, as well as reducing costs through improved manufacturing. When surging raw material prices exceed the benefits of these efforts, the Group may be able to upwardly revise product selling prices. However, if the prices continue to rise beyond these measures, there may be a negative impact on Group performance.

Business Risks

  1. 1Risks in Expanding Overseas Business Operations
    The Company is broadening its overseas business development, centered on China and the rest of Asia, as well as in North America, Europe and elsewhere. However, there are inherent risks in overseas operations. These include unforeseen legal and regulatory changes, vulnerability of industrial infrastructure, difficulties hiring and retaining qualified employees, and social or political instability caused by acts of terrorism and war.
  2. 2Risks in Procuring Raw Materials
    The Daicel Group engages in stable procurement of raw materials and strives to secure adequate supplies necessary for its production activities by conducting purchasing from multiple suppliers. Despite this preference for multiple suppliers, however, the Group may become reliant on a limited number of suppliers for certain special raw materials.
    Alternatively, supplies may be suspended due to events affecting a supplier, such as a natural disaster, accident or bankruptcy. Also, a sharp increase in demand could lead to a supply shortage. Any of these cases could have a negative effect on the Group's performance.
  3. 3Risks related to capital alliances/acquisitions
    The Group is engaged in corporate acquisitions and capital alliances in Japan and overseas with the aim of further business growth. 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.

Environmental Risks

  1. 1Risks Related to Infectious Diseases
    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.
  2. 2Natural Disasters
    One of the Group's primary manufacturing facilities, the Fuji Plant of Polyplastics Co., Ltd., is in a region that requires enhanced countermeasures for disaster prevention related to the anticipated Tokai earthquake. We conduct earthquake-training drills and take countermeasures to protect equipment at this site. We also practice disaster preparedness and emergency training drills at other facilities. However, in the event that significant damage is incurred from a natural disaster, Group results may be negatively affected.
  3. 3Risks Related to Environmental Regulations
    Due to the increasing social demands for environmental protection and the tightening of environmental regulations, the Group may be obliged to make capital expenditures or conduct business reorganization in order to achieve legal compliance, and this could have a negative effect on the Group's performance.
  4. 4Climate change risks
    Our Group aims to build a recycling-based process that coexists with the global environment together with all stakeholders. In order to realize a sustainable low-carbon society, the Group will endeavor to save energy by radically reviewing production processes, introducing new technologies, and optimizing energy use throughout the Group, and to reduce GHG (greenhouse gas). However, there is a physical risk that abnormal weather due to climate change will affect the operation and supply chain of the Group's plants, or by risks such as rising raw material, fuel and electricity prices due to an inability to respond to the transition to a low-carbon society. These factors may adversely affect the performance of the Group

Quality and Product

  1. 1Quality Guarantee and Product Liability
    The Daicel Group has established a quality guarantee framework and strives to assure product safety and prevent outflow of defective products. As a precaution, we also carry product liability insurance. However, in cases where products manufactured by the Company are found to be the cause of damage, the Company's performance may be negatively impacted.
  2. 2Accidents
    The Company routinely conducts safety and disaster prevention activities and strives to assure the safety of its manufacturing plants and other facilities on a daily basis. However, in the unlikely event of a fire, explosion, or other industrial accidents or disasters, the Company's performance may be negatively affected.

R&D risks

  1. 1Risks related to R&D and securing technical personnel
    The Group is actively conducting research and development activities to strengthen existing businesses and create new ones. However, if the speed of technological innovation is so fast that new products cannot be developed in a timely manner, and the desired results are not achieved and the plan is abandoned, the invested R&D costs cannot be recovered. In such cases, the Group's business performance may be adversely affected.
  2. 2Risks Related to Intellectual Property
    As stated in its Code of Conduct, the Daicel Group strives to maintain and protect its intellectual property (IP) rights and shall not infringe on the IP rights held by third parties.
    Based on this, the Group meticulously investigates IP-related information and adopts a strategic approach to the acquisition and management of IP rights, as well as to the conclusion and management of 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 have a negative effect on the Group's performance.


  1. 1Litigation risks
    The Group strives to comply with domestic and overseas laws and regulations. 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.
  2. 2Risks Related to Information Security
    In the conduct of its business, the Daicel Group holds large quantities of confidential and personal information. The Group is building management frameworks and conducting employee training programs to ensure appropriate handling of such information, and also constantly introduces and updates its security software to address the changing IT environment.
    However, there is a possibility that the Group's performance could be adversely affected in the event that such information is leaked or falsified due to a fault in the communications network, a malfunction or defect in the hardware or software on the 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 employee or contractor.


  1. 1Risk Related to Impairment Loss of Fixed Assets
    With respect to the machinery and equipment, land and buildings of the Group, 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 2023, the total carrying amount of property, plant and equipment and intangible assets was ¥267.3 billion. If the Company recognizes an impairment loss on fixed assets, it may adversely affect our business performance and financial position.
  2. 2Inappropriate actions concerning third-party certification registration of resin products of our group company
    Our group's Daicel Miraizu Ltd., was found to have acted improperly in connection with the certification by Underwriters Laboratories Limited Liability Company (hereinafter, UL), a third-party safety science organization in the United States, for some resin products sold by Daicel Miraizu Ltd.,. From the late 1980s to June 2017, during follow-up factory testing for the UL flame retardant standards, specimens were prepared and submitted separately from the designated lots. From the 1980s to May 2020, products with partially modified compositions at the time of registration were manufactured and sold without applying to UL (hereinafter referred to as the "Inappropriate Conduct".). As a result of reporting this improper conduct to UL, the UL certification of some products was revoked as of October 31, 2022. To date, we have not received any reports of accidents or other incidents involving final products using products whose UL certification has been revoked. We are also proceeding with re-registration applications for UL certification for products whose UL certification has been revoked. In connection with this, as a result of an unscheduled inspection by the Japan Quality Assurance Organization (hereinafter referred to as "JQA".), an ISO (International Organization for Standardization) accredited certification body, the certification range of ISO9001:2015* acquired by Daicel's Hirohata Plant was partially revoked and reduced on November 18, 2022, but the partially revoked and reduced certification range was re-certified on April 14, 2023. In response to this improper conduct, an investigation committee consisting of our company's independent outside corporate auditors and outside experts who have no interest in our company was established to investigate the facts of this improper conduct and whether there are similar cases related to UL certification at subsidiaries in our company. In addition, an analysis of the causes of these acts and recommendations for measures to prevent their recurrence were delegated, and an investigation report was received from the committee on December 16, 2022. This research report is published on our company website(Japanese only).
    In response to the Committee's recommendations on measures to prevent recurrence, the following initiatives have been implemented.
    The results of the investigation by the committee will be taken seriously by the entire Group, and we will steadily proceed with measures to prevent recurrence. We have once again positioned "Safety," "Quality" and "Compliance" as the foundations of our "manufacturing," and we newly established "Daicel Group Code of Conduct" and "Ethical Standards of Daicel Group" on April 1, 2023. We also worked to establish a system to prevent recurrence. On April 1, 2023, we separated the functions of auditing and promoting safety and quality, and implemented organizational changes to strengthen each function. Going forward, all our group executives and employees will return to the basics of manufacturing and make every effort to restore trust and prevent recurrence.
    Our group's results of operations may be affected if significant expenses related to the Products are incurred.

    *International standards for quality management systems