S T R AT E G Y

Titanium-related Technologies

Messages from the Division Managers

Catalyst
Division

Titanium
Division

Business overview
As one of the world's leading titanium manufacturers, theToho Titanium Group operates 4 businesses: the Titanium
Metal Business that manufactures and sells titanium metal;
the Catalyst Business and the Chemicals Business based on
the Titanium Metal Business; and the New Materials Business

Titanium
Metal Business

which opens up new possibilities for titanium. By accurately
identifying market needs and pursuing the unlimited potential oftitanium products and related technologies, we will contributeto our customers' product and business development, thereby
achieving sustainable growth for our Group.

Catalyst Business
Chemicals Business

Titanium feedstock
Chlorination
Titanium
tetrachloride

Titanium sponge
Melting
Titanium ingot
High-purity titanium
Titaniumpowder

Processed
titaniumproducts(Toho Technical Service)

Electrode material

Polyolefin production
catalysts

Reduction
Chloridation / reduction technology

Aircraft
General industry
Electronics materials

Raw materials

Petrochemicals
Electronics materials
Automotive parts
materials

High-purity titanium oxide
Uses
Ultra-fine nickel powder

Business, research,and engineering are
unified to demonstratecompetitiveness

800.0
600.0
400.0
200.0
0

17

Operating profit by business segment
Catalyst Business

Chemicals Business

171.8
158.1
82.7

87.8

543.9

139.0
98.0

587.0

314.3
FY2021

FY2022

FY2023 (forecast)

The strength of our catalysts is that they can be applied not only
to a specific polypropylene (PP) manufacturing process, butalso to several different processes. We also have a PP rating
technology that other catalyst manufacturers do not have. Ourability to discuss technology from the same perspective as ourcustomers also gives us a market advantage.
In 2022, we have established "strengthening costcompetitiveness", "product differentiation," and "new businessacquisition" as the pillars of our business strategy. We havealready established a method that significantly reduces
manufacturing costs, and have successfully produced
prototypes using commercial equipment. Going forward, in
addition to accelerating the development of higher-performance
PP catalysts through joint research with PP manufacturers anduniversities, we will promote our three pillars by strengthening
our sales capabilities.
The PP market is growing at an annual rate of 4%, but
price competition is intensifying, especially in the Asian market.
In order to lead our current research to success and establish
a strong business with high added value and high profits, wewould like to first ensure that we achieve our Medium-termManagement Plan by FY2025.

New Materials
Division

Chemicals
Division

Sales by business segment

1000.0

Our advanced titanium sponge smelting technology and ingot
melting technology have been highly praised by our manycustomers. However, given the steady growth in demand in theaviation industry and tight global supply due to the impact of
the conflict in Ukraine, we recognize that stably providing thequantities required by our customers is presently an important
issue. Against this backdrop, the Titanium Division has set its"Vision for 2030" for the company to "capture the top position in
global sales share of titanium sponge for aircrafts" and "obtainan ordinary profit to net sales ratio of 10%". We are focusing on
expanding production capacity and improving productivity.
In this period of major change, we believe that the progress
made in our Medium-term Management Plan up to FY2025 will
have a major impact on future development. We will work witha sense of speed to solidify our footing at our manufacturing
sites, increase production capacity, and improve our profit
structure. Also, by taking advantage of titanium's excellent
properties and further expanding its use in fields such as aircraft,general industry, and semiconductors, we will contribute to therealization of a sustainable society.

Hideo Funabashi(Toho Material)

New Materials
Business

Titanium Metal Business

Takeshi Shiraki

Building a strong
business with evenhigher added value

Potassium titanate

Porous Titanium(¥100 million)

Acceleratingtransformation
for future leaps(¥100 million)
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0
(20.0)I N T E G R AT E D R E P O R T 2 0 2 3

Titanium Metal Business

Catalyst Business

Chemicals Business
26.4
28.6
37.3
28.3

64.7

11.0
28.0
23.0

(3.1)
FY2021

FY2022

FY2023 (forecast)Takashi Fujii

In FY2022, we were largely able to carry out our main tasks ofincreasing the operating rate of the fourth nickel powder plant,
making investment decisions for a fifth nickel powder plant,
and promoting new development, as planned. Although sales
were sluggish due to the effects of China's economic slump, we
believe that we were able to strengthen initiatives that will lead tomedium- to long-term business growth.
Going forward, we recognize that the market will continue
to grow over the medium to long term, with demand forelectronic components, such as Multilayer Ceramic Capacitors(MLCC), expected to increase. We believe it is important tosteadily capture new demand while taking into account thetrends of emerging competitors such as Chinese manufacturers.
All of our products are based on our proprietary technology,
and the high appraisal we receive from our customers is thesource of our competitiveness. We will continue to improve our
R&D capabilities for newly developed products and maintain andexpand our supply capacity to reliably meet increasing demand.
Sales, research, and manufacturing will come together toaccelerate problem-solving toward "Vision for 2030".

Aiming to establish
the "Fourth Pillar"
by accelerating
commercialization

Kenichi Yamaguchi

The New Materials Division was launched in April 2023. The
mission of this division is to develop into a business, items thathave reached the commercialization stage through development
projects carried out by the Technology Strategy Headquarters(formerly the Technical Development Center). Through thepromotion of this commercialization, it is also an important mission
to contribute to achieving an annual sales of 10 billion yen for new
businesses envisioned in "Vision for 2030".
The first product that our division will work on commercializing
is porous titanium material (WEBTi), which is primarily used as acomponent for PEM water electrolysis generators for hydrogenproduction. The water electrolysis generator market is expected
to expand significantly as we move toward the realization of acarbon-neutral society. We will establish communication channels
with customers and expand the sales base by developing andimproving products that meet market needs. At the same time,
we will expand our production scale by establishing a stable mass
production process and improving productivity. We will also work
to improve the functions of our business management, such asbuilding quality control systems and risk management systems.
We will expand our human resources through active recruitmentof new graduates and mid-career employees, as well as enhance
our business promotion capabilities.

I N T E G R AT E D R E P O R T 2 0 2 318

Titanium Division
Expanding domains of application with stable
quality metallic titanium
In our Titanium Division, in addition to titanium sponges andtitanium ingots made by melting and casting the sponges, wehave a wide range of products such as DC Slab and titanium
powder, each with high added value, and their own superiorfeatures as a raw material.
With high quality and reliable supply, we provide titanium
products that satisfy our customers.

Catalyst Division
Main Products

Titanium sponge

Titanium ingot (rectangular)

High-purity titanium ingot(round)Titanium powder

Titanium ingot (DC Slab)Contributing to Value-added Polyolefins

Main Products

Taking advantage of our ability to internally procure titanium
tetrachloride and magnesium chloride, which are raw materials
for catalysts from the titanium manufacturing process, wedevelop, manufacture (including outsourced manufacturing),and sell catalysts for the production of polyolefins (PO) such as
polypropylene (PP), a plastic product, and polyethylene (PE). We
also process and sell magnesium chloride for applications suchas catalyst raw material and raw material for pharmaceuticalintermediates.

Polyolefin catalysts∙ For PP manufacturing∙ For PE manufacturing∙ For other olefin polymerization

Market Environment and Overview of the Current Fiscal YearThe demand for aircraft and general industrial applications has continued
to be strong since FY2022. In addition to increased demand for new
aircraft due to recovery in passenger demand from the COVID-19
pandemic, supply and demand became tight, especially for titanium
sponge, a major raw material, due to the demand for substitutes causedby the avoidance of Russian-made wrought products due to the invasionof Ukraine. Our domestic Chigasaki and Wakamatsu plants continue tooperate at full capacity, and our plant in Saudi Arabia has also preparedfor full operation. The tight situation for titanium is expected to continue
for several years, so we are increasing production capacity through facility
and process improvements, as well as considering the construction of anew plant that can ensure profitability.

Demand for polyolefin catalysts in Asia continues to weaken, mainly
due to the economic downturn in China. Due to weak demandin the first half of FY2023, sales volume is below the level of thesame period in FY2022, but we expect it to gradually recover fromthe second half of FY2023 and return to a growth trajectory. Duein part to the effects of a weaker yen, tight supply and demand is
expected to continue. Global demand for PP is expected to growat an annual rate of 4%. In response to this growth, we are working
on further product improvements, providing catalysts with reduced
environmental impact, and developing new products.

Mediumterm
to 2025
Long term
to 2030

General Industry

100
50
0

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
year■Demand for aircraft remains strong due to recovery from the
COVID-19 pandemic and avoidance of procurement from Russia■General industrial demand also recovers, mainly for high-end
products■For titanium ore, demand for titanium oxide is currently on the
decline, but is expected to recover by the end of the year, andprices are expected to rise from the second half of the year.
■The demand and supply gap in the aviation industry is expected tocontinue to exist■Customers place importance on securing quantity■Titanium ore prices continue to rise■The aircraft industry is growing at an annual rate of about 4%■Continued avoidance of procurement from Russia is expected

Operating profit

600.0

543.9

500.0
400.0
300.0

587.0

70.0

64.7

60.0
50.0
40.0

314.3

30.0

23.0

20.0

200.0

10.0

100.0
0

Short term
FY20230

FY2021 FY2022 FY2023(forecast)(10.0)■The polypropylene market weakens due to soaring raw material
prices and China's Zero-COVID policy, and catalyst usage
declines among customers in Asia, Europe, America, and Japan.
■Demand bottoms out and gradually recovers in the second halfof FY2023

Apply a priceformula linked tocost fluctuations

Aim to optimize prices by linking
sales prices to fluctuations
in energy costs such as raw
materials, secondary materials,
and electricity related to products.

19

5
4
3
2
1
0

2010

2015

80.0

■Polypropylene demand returns to a growth trajectory fromFY2024 onwards

60.0Long term
to 2030■Polypropylene demand is expected to grow at an annual rate ofaround 4%

20.0

FY2021 FY2022 FY2023(forecast)

2030
year

35.0

87.8

82.7

98.0

30.0

28.3

28.6

28.0

25.0
20.0
15.0

40.0

0

2025

(¥100 million)

120.0
100.0

2020

Operating profit(¥100 million)(3.1)

Growth Strategy

6

Mediumterm
to 202510.0
5.0

FY2021 FY2022 FY2023(forecast)

0

FY2021 FY2022 FY2023(forecast)

Our catalysts
are widelyused in plastic
products that are
essential for daily
necessities, aswell as automobile
bumpers andinterior PP.

High-performance
catalyst
development
research is being
conducted in ourlatest catalyst
research facilities.

Plant in Saudi Arabia
operating towards fullproduction

1

7

Net sales

Outlook on the business environment(¥100 million)(¥100 million)

Global PP growth rate (our YoY estimate)

PP growth rate (%)

Aviation Industry / Military150

Net sales

Outlook on the business environment
Short term
FY2023

Titanium sponge demand forecast (our estimate) *2019 is set to 100∙ Magnesium chloride
powder∙ Magnesium chloride lump∙ Magnesium chloride
Catalyst raw
powder/titaniummaterials
trichloride mixture

External donor for PP production

THC catalyst

Market Environment and Overview of the Current Fiscal YearRaw materials for catalyst
supports and pharmaceuticalintermediates

Growth Strategy

2

3

Aim to increase capacity by
3 kt/year at the two domestic
plants combined by increasing
capacity through facility
improvements at each plant.

Start full operation within 2023
in order to respond to the strong
increase in demand.

Increase titanium
sponge production
capacity at Wakamatsu/
Chigasaki (3 kt/year)

Full operation of
the Saudi Arabia
Sponge Plant

I N T E G R AT E D R E P O R T 2 0 2 3

4

Improve titanium
ingot production
efficiency

Aim to improve productivity
by improving operations andoptimizing personnel allocation.

1

Increase production capacity through improvements
in production technology and other areas(approximately 60% increase compared tothe current production capacity)

Aim to expand production capacity by fundamentally reviewing issues in
the production process.

2

Formulate a plan to increase capacity
by constructing a new plant

Start by considering the location of the new plant in anticipation of future
demand.

I N T E G R AT E D R E P O R T 2 0 2 3

20

Chemicals Division

New Materials Division

Powder manufacturing technologies supporting theevolution of electronic component materials

Full-scale start towards mass production of WEBTi as need increases

Main Products

In recent years, hydrogen has been attracting attention as a next-generation energy source. That
is why the porous titanium material (WEBTi) we developed is expected to be used in solid polymer
electrolyte membrane (PEM) water electrolysis generators, a type of hydrogen generator. Our division
will work towards early commercialization of WEBTi, including establishing a supply system. We will
also move forward with initiatives to commercialize other new business projects as well.

In our Chemicals Division, we manufacture and sell high-purity titaniumoxide, ultra-fine nickel powder, and other electronic component materials
used in multilayer ceramic capacitors (MLCC), PTC thermistors (positive
temperature coefficient thermistors), and dielectric resonators. In particular,
ultra-fine nickel powder is used for the internal electrodes of MLCC, taking
advantage of its ability to control particle size and surface condition. We willfurther refine our powder manufacturing technology with high levels of quality
stability to meet growing demand in the markets for telecommunications
equipment, in-vehicle electrical components, and electronic equipment.

High-purity titanium oxidea Carbon-neutral Society
FOCUS Achieving
with the Power of WEBTi Materials

Ultra-fine nickel powder

p.23

Market Environment and Overview of the Current Fiscal Year

Market Environment and Overview of the Current Fiscal YearIn FY2022, while MLCC, the main application for our main
product, ultra-fine nickel powder, was on the road to recovery
from the decline in demand caused by the COVID-19 pandemic,
we entered an adjustment phase once again due to the impactof China's economic stagnation, and demand recovery for bothcommunication and automotive applications was delayed. The
slump in demand continued into the first half of FY2023, and as
a result, the liquidation of distribution inventories is also being
protracted. Although a full-fledged recovery in demand is expected
to occur in the second half of FY2023, sales volume and profits are
expected to decline in FY2023.
In the long term, demand for electronic components is
expected to further expand due to faster communications, higher
functionality of electronic devices, and automobile electrification.
In order to meet this growing demand, we have decided to build a
new nickel powder plant to strengthen our supply system.

WEBTi, which has been under development since the early 2000s,
has grown into a developed product that receives many inquiries
as a material for PEM water electrolysis generators.
We will establish an initial mass production system in FY20232024, and aim to fully commercialize it in FY2025.
We are also progressing with planning and development
projects other than WEBTi, and will continue their commercialization
as well.

Applications

Internal electrode
Electroceramics
material (nickel powder)

Pharmaceuticals

Optical materials■Although there is an impression that the decline in MLCC
demand has bottomed out, recovery in demand for bothcommunication and automotive applications is delayed, mainly
due to the prolonged economic slump in China.
■Considering the elimination of excess inventory in distribution, it
is estimated that demand for MLCC materials will recover fromthe second half of FY2023 onwards.

Mediumterm
to 2025■Under the assumption that the Chinese economy will bestabilized, once MLCC demand recovers, both communication
and automotive applications will return to a growth trajectory.
■In particular, automotive applications are expected to grow as
the speed of automobile electrification accelerates.

Long term
to 2030■There will be no change in the trends in the improvement ofcommunication functionality, automobile electrification, anddriving automation.
■MLCC demand is expected to grow at an annual rate of
approximately 7%

Growth Strategy

1

Increase production
capacity by operating
the fifth nickel powder plant(scheduled for FY2025)(approximately 20% increase
compared to the current
production capacity)

In line with the growth in MLCC demand,the company will build a new plant toincrease the supply capacity for ultra-finenickel powder, which is a raw material forcomponents.

21

WEBTi-K (development product)

PEM electrolytic tank installation capacity forecast(our estimate)
(GW)
40
30
20
10

MLCC demand forecast (our estimate) *2020 is set at 100

0

250
200

2023

2024

2025

2030
year

Outlook on the business environment

150
100
50

"Vision for 2030"

0

2020

2021

2022

2023

2024

2025

2030
year

Outlook on the business environment
Short term
FY2023Main Products

Net sales

Operating profit(¥100 million)(¥100 million)

200.0
150.0

158.1

40.0

171.8

35.0
139.0

30.0
25.0
15.0
10.0

50.0

FY2021 FY2022 FY2023(forecast)0

3 billion yen/year(target)Mediumterm
to 2025■We aim to start mass production of WEBTi in 2024
■Proceed with new planning and development projects
simultaneouslyLong term
to 2030■The porous titanium material market for PEM water electrolysis
generators has the potential to become a megamarket.
■Commercializing new projects other than WEBTi

Growth Strategy
26.4

1Commercialization of WEBTi
via the New Materials Division

2

3 Plan and develop new businessthemes at the Technology
Strategy Department andTechnology Development Center

Increased capacity in linewith business expansion

11.0

Solve issues in the production process andestablish a mass production system.

5.00

Sales of10 billion yen/year

Achievement of■Requests for samples of porous titanium material WEBTi for PEM
water electrolysis generators are increasing.

37.3

20.0

100.0

Ordinary profit

New Business

Short term
FY2023

FY2021 FY2022 FY2023(forecast)TOPIC

The porous titanium material market for PEM
water electrolysis generators has the potential
to become a megamarket. Continue toincrease capacity while paying close attention
to market trends.

Simultaneously plan new planning anddevelopment projects that come after WEBTi.

FOCUS

Start of construction of the Nickel Powder Plant
No. 5 within the Wakamatsu Plant (September 2023)

Start of the New Materials
Division and a new structure

Officer in Charge

Ultrafine nickel powder, the main product of the Chemicals Division, is used as the internal electrodein MLCC. MLCC is an electronic component with functions such as assisting and stabilizing power
supply, and suppressing noise. It is installed in most electronic devices such as mobile and home
appliances, automobiles, IT, and infrastructure equipment. The market is expected to continue togrow significantly in the future as communication equipment becomes more sophisticated and 6G(6th generation mobile communication systems) become more practical.
In the past, we constructed a nickel powder plant in the Wakamatsu Plant to enhance our
production capacity, and now we decided to construct a new plant in order to strengthen the supply
system of nickel powder that can respond to compact MLCC with large capacities. Moving forward,
we will continue to invest in expansion in line with the growth of the MLCC market.

We started with a total of 51 people, mainly development
project members, but also new personnel. In order tomake this the Fourth Pillar of our business, we will work
diligently to resolve issues and expand our organizationand personnel.

Division Manager,
New Materials
Division

I N T E G R AT E D R E P O R T 2 0 2 3

Planning &Coordination GroupNew Materials
Planning &Sales GroupI N T E G R AT E D R E P O R T 2 0 2 3

Porous Titanium
Sheet Production &Development GroupHigh Purity Chloride
Production &Development Group

22