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 18, 2025.

• Market Risks
• Business Risks
• Environmental Risks
• Quality and Product
• R&D risks
• Compliance
• Others

1. 1Risks from Extreme Market Fluctuations
   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, U.S. tariff policies and the tariff policies of other countries resulting from these policies have a potential risk to lead to the recession of world economy, changes to Group’s customers’ commercial trends and demand, thus making an impact to the Group’s financial results.

   Countermeasures

   As a response, the Group is developing new applications and markets, and is strengthening efforts to secure sales volume and revenue, including thorough cost reductions. Regarding the tariff policies of each country, the Group also monitors the trends and potential impacts to the Group’s business timely, and considers the suppliers from optimal locations depending on the situations, and passing on increased costs to sales prices as necessary.

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.

   Countermeasures

   Although the Company executes exchange contracts and otherwise hedges foreign currency risk, these activities are not able to eliminate all the risk.
   The Company’s ratio of overseas sales to consolidated net sales is 67.3% in the fiscal year ended March 31, 2025. According to our calculations, a 1-yen change in the US dollar/yen rate will change annual sales by approximately 2.7 billion yen and consolidated operating income by approximately 900 million yen.

3. 3Fluctuations in Raw Material (Methanol) Prices
   The Daicel Group’s many core products are made from methanol directly or indirectly. There is a risk that an increase in the purchase price will have a significant impact on our business results Methanol is positioned not only as a raw material for chemical products, but also as a clean energy source in recent years, and there is a risk that the price of methanol will be fluctuated in the future by the trends in demand of the chemical industry due to increased concern about environmental issues.

   Countermeasures

   We are taking steps to stably purchase relatively inexpensive methanol, such as long-term contracts with and investments in methanol manufacturing companies.

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. However, fluctuations in raw material and fuel price have continued due in part to inflation trends in the overall economy and geopolitical risks, and this trend is not expected to change for the foreseeable future.

   Countermeasures

   If raw material and fuel prices continue to soar, we will absorb them as much as possible by passing them on to product sales prices in addition to the cost reduction measures described above.

1. 1Risks in Expanding Overseas Business Operations
   As the Group continues to aggressively expand its overseas business, geopolitical risks such as unforeseen legal and regulatory changes, vulnerability of industrial infrastructure, difficulties hiring and retaining 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.

   Countermeasures

   To address this issue, the Group is reviewing its supply chain structure to ensure for mitigating political risk in case of policy change at the particular countries.

2. 2Risks Related to Securing Human Resources
   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, and changes in the employment environment at overseas bases, it may have a significant impact on the Group’s business and results from a long-term perspective.

   Countermeasures

   The Group actively hires new graduates as well as experienced employees throughout the year, and has established a fair personnel evaluation and treatment system to nurture and retain personnel who can thrive independently. We are also working to train potential successors in the education program for the next generation of managers.

3. 3Risks Related to Logistics
   The distribution environment in Japan expects the increased labor shortage of transport drivers and stevedores due to the declining working population caused by the low birth rate and aging population, in addition to the “upper limit on overtime work” in the Workstyle Reform Law, and there is a risk that the distribution costs will rise and the competitiveness of the Group’s products will decline.

   Countermeasures

   The Group has had companies specializing in logistics and has focused on achieving an efficient and rational transportation system within the governance of the entire Group. In 2022, we established a cross-group Logistics Reform Project to collaborate with other companies and formulate strategies to strengthen global logistics. Since 2023, we have participated in the Chemical Products Working Group under the guidance of the Ministry of Economy, Trade and Industry and the Ministry of Land, Infrastructure, Transport and Tourism, and are working toward the realization of joint logistics.

4. 4Risks in Procuring Raw Materials
   Chemical products, which are the core products of the Group, are focused on highly functional products with high added value, and the number of suppliers is limited because many of the raw materials are very strict and special in terms of quality standards. 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.

   Countermeasures

   We purchase raw materials from multiple suppliers to ensure stable procurement and ensure that we have sufficient raw materials for production.

5. 5Risks Related to Capital Alliances/Acquisitions
   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.

   Countermeasures

   The Group makes investment decisions with thorough due diligence not only the Group’s own investigation but also external investigation. However, the Group reviews business scheme such as withdrawal immediately if the investment results cannot be obtained as expected.

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.

   Countermeasures

   The Group formulates guidelines in the event of pandemic to secure employees’ health through measures such as a combination of telework and on-site work. The Group also formulates and manages business continuity plans (BCPs) to minimize damage and decreases in operational capability as well as to maintain business operations or at least ensure the early resumption of business operations.

2. 2Natural Disasters
   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 of Polyplastics Co., Ltd., is in a region that requires enhanced countermeasures for disaster prevention related to an anticipated Tokai earthquake. Also, ｔhere is a risk that a massive earthquake such as Nankai megathrust earthquakes could be occurred anywhere, and that a wide-area disaster far exceeding the expected level could be occurred.

   Countermeasures

   The Group formulates and manages business continuity plans (BCPs) to maintain business operations or at least ensure the early resumption of business operations. And necessary measures such as seismic reinforcement are carried out sequentially as planned, disaster drills, stockpiling of necessary goods and drills for initial contingency response are carried out in preparation for the occurrence of a disaster, and we are always in close communication with suppliers in consideration of the possibility that the procurement of raw materials may not be available or may be delayed due to the impact of the disaster.

3. 3Risks Related to Environmental Regulations
   Due to the increasing social demands for environmental protection, the environmental regulations are tightening. In our production activities, we have made capital investments to comply with these regulatory laws concerning these regulations. The impact of chemical products on the environment has also been emphasized, and environmental regulations may affect sales and adversely affect the Group’s business performance.

   Countermeasures

   The Group makes capital investments to comply with regulatory laws concerning environmental regulations, and develops and sells products compatible with environmental regulations.

4. 4Risks Related to Climate Change
   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 an increase in capital investment for GHG emission reduction or risks such as 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. In Japan, we believe that the risk of incurring costs related to GHG emissions is increasing, partly due to the announcement of the full-scale introduction of the Emissions Trading System (GX-ETS) from fiscal 2026.

   Countermeasures

   The Group works to reduce GHG emission by energy savings such as thorough elimination of wastage and loss in the manufacturing process based on DAICEL Production Innovation, an introduction of innovative technology, optimization of the amount of energy consumption in overall Group companies.

1. 1Risks Related to Quality Guarantee and Product Liability
   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.

   Countermeasures

   We have established a quality guarantee system for our products and are working to ensure product safety and prevent leakage of defective products. We also carry liability insurance just in case. In particular, we discovered inappropriate behaviors for some resin products sold by Daicel Miraizu Ltd., one of our group companies in 2022, concerning certification by Underwriters Laboratories Limited Liability Company (hereinafter, UL), a third-party safety science organization in the United States. Regarding this matter, we completed measures to prevent recurrence by verification that this behavior is not currently occurring.

2. 2Risks Related to Accidents
   The Group is a chemical company, and in the event of an industrial accident such as a fire or explosion at plants, the damage could be severe and the Group’s business performance could be adversely affected.

   Countermeasures

   The Group regularly conducts risk assessments to identify and address hazards. The causes of problems that occur at Daicel Group sites are discussed the appropriateness of countermeasures to address them, and efforts are made to prevent similar incidents. Also, we are strengthening crisis assessment on the assumption of a fire or explosion, strengthening infrastructure to minimize human damage and respond to a disaster by installing remote fire extinguishing equipment, and continuously taking measures for safety and disaster prevention training.

1. 1Risks Related to R&D
   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 recent years that new products cannot be developed and commercialized as planned, there is a risk that the invested R&D costs cannot be recovered.

   Countermeasures

   We conduct thorough discussions and make decisions on the selection of research topics and allocation of resources at the management level. We also work to improve the efficiency of research and development through joint research by industry, academia, government, and cooperation with other companies, and to link it to commercialization.

2. 2Risks Related to Intellectual Property (IP)
   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.

   Countermeasures

   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 intellectual property rights and the conclusion and management of appropriate contracts to reduce such risks. In particular, when developing new products and technologies, we recognize that it is important to acquire intellectual property rights with the awareness of business competitors in order to give our Company an advantage in the future development of our business, and to prevent infringement lawsuits from other companies.

1. 1Litigation Risks
   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 a judicial decision, etc., the Group’s operating results and financial position may be adversely affected.

   Countermeasures

   The Group collects information of law relevant to our businesses to educate and develop its literacy, and makes procedure for signing important contracts and observing laws and regulations to reduce its risks.

2. 2Risks Related to Information Security
   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.

   Countermeasures

   The Group is building management frameworks and also constantly introduces and updates its security software and devices to address the changing IT technology trend. We also provide training for all officers and employees to deal with suspicious emails.

3. 3Human Rights Risk
   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.

   Countermeasures

   As a countermeasure, the Group has established the Daicel Group Human Rights Policy and regularly conducts due diligence on human rights to reduce risks. We also ask major suppliers to complete a Self-Assessment-Questionnaire (SAQ) on CSR procurement, which includes assessment of human rights and labor practices, to identify any human rights risks in our supply chain.

1. 1Risk Related to Impairment Loss of Fixed Assets
   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 2025, the total carrying amount of property, plant and equipment and intangible assets was 330.1 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.

   Countermeasures

   The Group makes investments with well-rounded consideration and judgement. The Group considers its position in the Mid-Term Management Strategy, payback period and efficiency by evaluating its marketing and technological risks, construction schedule, appropriateness and validity of the amount of capital investment. The Group also improves accuracy of our investment plans by involving internal and external experts into the process of investment discussions for each case.