3CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

A History Dating Back 160 Years
to Our Founding

2020s

1861

2000
2020s

Founded in the Nishijin District of Kyoto, JapanIn 1926, Chori began handling rayon yarn upon its founding as a raw silk wholesaler. Due to the lack of market knowledge at the time,
we visited weavers on a number of occasions to enhance awareness of rayon yarn and continued to improve its level of quality while
orchestrating efforts to expand the market. In 1937, we became a major producer in the rayon yarn industry with an approximate 30%
share of the domestic market, which led to the establishment of our business foundation as a specialized trading company in textiles.
Moreover, the name “Chori” originates from the combination of the Japanese characters “蝶” (cho), derived from the image of a mothcreating raw silk, and “理” (ri), stemming from the first name of Chori’s first president, Riichiro Ohashi.

1970
2000s

1948
1970s

Setbacks

In fiscal 2019, Chori’s ordinary income totaled ¥8.7 billion, a record

Selection and Concentration of Businesses
Due to Significant Losses

GrowthBreakthroughResults

Four Consecutive Years of Record-High
Ordinary Income

A Period of
A Period of

A Period of

In 1956, Chori engaged in the business of chemical products andbillion while incurring significant losses in the finance and realestate businesses. This prompted a restructuring of our business,
which consisted of revising our portfolio of lifestyle-related
products and devoting our attention to Chori’s core businesses.

expanded our business to include lifestyle-related products, such1975

as food, clothing, and housing and leisure, and successfully
improved our business results by diversifying our operations.

1948	CHORI CO., LTD. established1952	Moves head office to Osaka
1953	Commences exclusive sales ofwoolly nylon through theestablishment of a joint venture
for the manufacture of woolly
nylon with Toyo Rayon Co., Ltd.
(currently TORAY INDUSTRIES,
INC.)

1956	Launches Chemicals Business

1976

1957	Establishes Chori New York Co.,

Ltd. (currently CHORI AMERICA,
INC.), Chori’s first overseas
subsidiary1959	Stock listed on andling of angora sweaters
H
exceeds 300,000 units, resulting
in high market share1993 stablishes CHORI (SHANGHAI)
E
CO., LTD. as first subsidiaryin China

1996

 ecures order for railway projectS
in Kazakhstan

Tokyo Stock Exchange	Designated as one of the firstfriendly trading companies
by China

1972	Develops a large-scalecondominium

 stablishes Fukui Chori
E
Committee and Kanazawa Chori
Committee (currently Hokuriku
Chori Committee) with twisted
yarn manufacturers and otherbusiness partners in the
Hokuriku region

1985

Osaka Securities Exchange

1961	Stock listed onBeginscompany restructuringwith drastic streamlining anddownsizing of management

1997

2002

 stablishes joint venture
E
Chongqing Dazu Red Butterfly
Strontium Industry Co., Ltd.
 pins off the Synthetic Resin
S
Business Division into aseparate company

raw silk wholesaler in 1861, prior to Japan’s
to evolve with the times and accommodate thechemical fertilizer production project in Nigeria, and we continue
to actively engage in such social contribution activities to this day.

needs of society while actively pursuing the
expansion of its business.

2004

2005

 ecomes a consolidatedB
subsidiary of TORAY
INDUSTRIES, INC.
 stablishes CHORI (CHINA) CO.,E
LTD., the first Japanese trading
company subsidiary with therights to sell and trade in China

2006

 xpands Chemicals BusinessEthrough the supply of raw
materials for epoxy resin2012

 ngages in capital participationEin manufacture of electrode foil
for aluminum electrolytic
capacitors

	Engages in capital participationin MEGACHEM LIMITED, a
trading company specializing inchemicals in Singapore

2003

2013

	Holds Textiles Exhibition(currently CHORI Exhibition)

anniversary of its founding. Established as a

ipating in a lithium compound production project in Chile and a	Pla-Net Holdings, Inc. (currently
Sojitz Pla-Net Corporation)acquires all shares of Chori
Pla-Techno Co., Ltd.
 aunches “Reborn Management
LPlan” medium-term management plan and undergoes
sweeping structural reforms

In 2021, Chori celebrated the 160thtransition to the Meiji Era, Chori has continued

machinery and developed the business alongside the Fibers,
Textiles, and Garments Business. Meanwhile, in the 1970s, we

Our New Stagehigh for the fourth year in a row. Meanwhile, we also began partic­

In fiscal 1991, Chori recorded its highest net sales ever of ¥755.5

Handling of Synthetic Resin, Chemical
Products, and Various Types of MachineryTransitioning to akes PTI Japan LimitedM(currently CHORI GLEX CO.,LTD.), a trading company
specializing in chemicals, a
consolidated subsidiary

2014Relocates Tokyo head office toShinagawa2015

 akes Miyako Kagaku Co., Ltd.,M
a trading company specializing inchemicals, a consolidated
subsidiary2016

 olds first annual Hokuriku
H
Yarn Fair2017

 articipates in lithium compoundP
production project in Chile	Splits off Machinery Businessand establishes Chori MachineryCo., Ltd.
	Makes ASADA U CO., LTD., asales company of automotive
interior and packaging materials,
a consolidated subsidiary2018 akes KOZAKURA SHOKAI CO.,M
LTD., a trading company
specializing in chemicals, a
consolidated subsidiary	Establishes a joint venture with
MATSUOKA CORPORATION,
FAST RETAILING CO., LTD., andTORAY INDUSTRIES, INC. in
Indonesia	Participates in First China–Japan
Forum on Third-Party
Market Cooperation2019

 stablishes joint project withE
Utsumi Recycle Systems Inc. forthe sale of recycled pellets

	Participates in chemical fertilizer
production project in Nigeria

Under Chori Innovation Plan 2022, our medium-term management planunveiled in fiscal 2020, we are working to lay a solid foundation for our
new stage of consistently delivering ordinary income of ¥10.0 billion or
more. Since its founding, Chori has continued to grow its business byframing the drastic changes that have occurred in its business environment as opportunities and fully embracing them. Moving ahead, we willremain firmly committed to enhancing our corporate value with the goalof realizing sustainable growth.

2021

 akes Sumitex International Company Limited, aMspecialized trading company in textiles, a consolidated subsidiary

4

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

Our Expanding Footprint Overseas

Establishment of Chori New YorkCo., Ltd. (Currently CHORIAMERICA, INC.)

Following the resumption of private foreign trade in 1949, Chori began selling textiles to markets in Southeast Asia
and South America. Our exports to Southeast Asia, Africa, North America, and Central and South America also
resumed thereafter, while our global network expanded with the establishment of overseas bases in the United

Chori began sourcing materials from Southeast Asia and otherStates, Germany, Canada, Australia, Hong Kong, South Korea, the Philippines, and other locations.

regions across the globe by taking full advantage of the higheconomic growth period that transpired after World War II aswell as of its distinctive global network. In particular, Chori New

Expansion of Overseas Tradewith Central and South America
through the Establishment of
CHORI COMERCIAL DE
MEXICO, S.A. DE C.V.

Our Long-Standing Business Ties
with Greater China* Establishedthrough Our 14 Business Locations
Chori has a long history of business relations in China, as
demonstrated by its designation as one of the first friendly trading

York Co., Ltd. expanded as a hub for the import and export ofJapanese-made textiles with markets in North America.

In the 1960s, representative offices were established incompanies by the Chinese government in 1961. China is regarded not

El Salvador, Lima, and Sao Paolo to serve as core bases

only as one of our regions of production but also as a strategic basefor overseas trade with Central and South America. With thefor offshore trade and, in view of this, we are moving full steam ahead

establishment of CHORI COMERCIAL DE MEXICO, S.A. DE

with the strengthening and growth of our business in this region.

C.V. in 2017, our business in Central and South America has* Includes China, Taiwan, and Hong Kong

expanded ever since through the supply of materials of a major
automaker to the region and other initiatives.

Major Overseas Bases and
Net Sales in Japan and Overseas*

Net sales surpasses

700.0-billion mark￥500.0-billion markDomestic sales
Import sales
Export sales
Overseas sales

1987
Establishes CHORI CO.,(HONG KONG) LTD.

1963

1974

2009

Establishes
CHORI (SHANGHAI) CO., LTD.

Establishes CHORI (CHINA)
CO., LTD.

Establishes Chori
Trading (Thailand)Co., Ltd.

Overseas Subsidiaries

Establishes Chori Iran Co., Ltd.

1970

1980

Moscow (Russia)

Establishes PT. CHORI INDONESIA

2001

Establishes CHORITRADING(MALAYSIA) SDN.
BHD.

1976

Establishes
Chori Middle
East FZE

1990

2000

Tashkent (Uzbekistan)Beijing (China)

Ho Chi Minh City (Vietnam)

2010Jeddah (Saudi Arabia)

Charlotte (the U.S.)

Qingdao (China)
Santiago (Chile)

Representative Offices

Nantong (China)

 conomic boom created byE
the Tokyo Olympic Games(1962–1964)Izanagi economic boom of
1965–1970

Major developments in Japan1978

 ormalization of Japan–
N
China diplomatic relations
1971

Nixon Shock

Major developments overseas

1973

First oil shock

1991–2000s

1985 onclusion of Japan–China Treaty
Cof Peace and Friendship
1979

Second oil shock

Collapse of bubble economy

Plaza Accord

2001

 eunification ofR
East and West
Germany

1995

 reat Hanshin-Awaji
G
Earthquake

Cambodia

2003

SARS epidemic

Lima (Peru)
Istanbul (Turkey)

Manila (Philippines)
Wuhan (China)

2011

Multiple terrorist attacks in the U.S.

 reat East JapanG
Earthquake

Heisei depression
1990

2020

Guiyang (China)
Dhaka(Bangladesh)Shenzhen (China)
Ruian (China)

1972

Establishes CHORI (DALIAN)
COMMERCIAL IMPORTEXPORT CO., LTD.

1995

1989

Establishes THAI CHORI CO., LTD.

2019

2005

Establishes CHORI SINGAPORE PTE LTD

Iwato economic boom of
1958–1961

Establishes CHORI COMERCIAL
DE MEXICO, S.A. DE C.V.

Establishes TAIWAN CHORIMERCHANDISE
COOPERATION LTD.

1993

1973

Establishes Chori GmbH(currently Chori Europe GmbH) inmu economic boom ofJthe mid-1950s

2017

Establishes
CHORI TRADING INDIA
PRIVATE LIMITED

Establishes CHORI (TIANJIN)
CO., LTD. and CHORI(DALIAN) TRADING CO., LTD.

30

1950–1970s

2014

2004

Global network expands tocountries
with the additions of Chori East Africa Co.,
Ltd., Chori Canada, Ltd., and Chori Australia
Pty Ltd.

1960

Establishes CHORI VIETNAM
CO., LTD.

2018￥* Based on the results of securities reports

Establishes Chori New York Co., Ltd.
(currently CHORI AMERICA, INC.)

2016

Establishes
CHORI KOREA
CO., LTD.

Net sales surpasses

Overseas bases shown in italics have either discontinued operations
or are currently inactive.

1957

2012

2008

Global Financial Crisis

2017

Inauguration of former U.S.
President Donald J. Trump
2020

COVID-19
pandemic

6

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

Chori’s Strengths

Cultivated Since Its Foundation

Strength

1

Strength2

3Strength

UniqueGlobal Network

Human
Resources

History

Our Unique ProductProcurement Network andKnow-How in Overseas Trade

Timely Responses to
Customer Needs Provided
by Our Team of Experts

Our Proven Track Record andDistinctive Business Ties
Accumulated over 160 Years

In 1949, private overseas trade resumed

At Chori, our employees are assigned toOver the course of its long history, Choriupon the conclusion of World War II,

either the Fibers, Textiles, and Garments

has developed solid relationships withand Chori proceeded in full force toBusiness, the Chemicals Business, or

prominent suppliers across the globe. Our

resuscitate its overseas business. At

the Machinery Business over the longconnection with China has been particularly

Chori, we have built a global network

term and, for that reason, they are wellstrong, with our designation as one of thethat currently consists of 969 employ-versed in their respective fields. Their

first friendly trading companies in 1961,ees on a consolidated basis and 35

expert knowledge encompasses a wideprior to the normalization of Japan–China

locations overseas, encompassing

range of domains, including productdiplomatic relations, serving as a prime

China and other parts of Asia as wellquality, manufacturing know-how, andexample. In 2005, we also established aas the Middle East, Africa, and Souththe technological capabilities of our

trading company subsidiary with the rights

America. Through the growth of our

suppliers. The ability to utilize this exper-

to sell and trade in China. On the strength

global network over the years, we havetise to identify the needs of the market

of its long-nurtured and solid business ties

enhanced our line of expertise andand propose solutions to customers

with China, Chori has built a formidable

competitive advantages in various

represents one of Chori’s competitive

supply chain in the country. China serves

markets. In addition, our sales outside

strengths. Moreover, we address theas a hub for the production, procurement,of Japan have expanded on thevarious needs of our customers throughand domestic sales activities of our Fibers,

strength of our long-cultivated know-

not only the efforts of our operations in

Textiles, and Garments Business as well

how in overseas trade, with overseas

Japan but also through uniting together

as for exports to third-party markets in thetransactions accounting for roughly

as an organization and sharing

Chemicals and Machinery businesses,

70% of our total net sales.

information with our subsidiaries andwhich we will fully exploit in a bid to

Human Resources
Expertise, technologies, and know-how
Communication skills
 rganizational capabilities and anOawareness of different cultures

Procurement
Capabilities

Responsiveness(Promptness)

Ability to

Develop a Global
UniqueSupply Chain

Global NetworkAn extensive business network

Global bases and sales routes

Credibility(a proven track record)

Product management teamProduct procurement network
Marketing capabilities
Know-how in overseas trade

History

Network

 ne of the first friendlyO
trading companies to be
designated by China

offices overseas.

con­tinue the expansion of our businessin this country.

8

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

President’s Message

We will continue to evolve with an eye

on the next generation by consistently deliveringo­ rdinary income of ¥10.0 billion or more.

Commemoration of Our 160th Anniversary

Overview of Fiscal 2020 Results

Founded as a raw silk wholesaler in 1861, Chori celebrated

In fiscal 2020, the initial year of Chori Innovation Plan 2022,

the 160th anniversary of its founding in 2021. This year also

its medium-term management plan, Chori’s business seg-marks the 73rd year since CHORI CO., LTD. was establishedments were hit hard by the effects of COVID-19, particularly

in 1948. While riding the wave of economic growth in Japanin the first quarter. While gradually recovering the profitability

after World War II and continuously expanding the scale of itsof core businesses from the second quarter, ultimately bothbusiness, Chori suffered hardships during a period of around

net sales and ordinary income in fiscal 2020 fell from the28 years that started in the latter half of the 1970s. As a result

previous year, as net sales amounted to ¥216.2 billion,of enormous losses incurred in the leisure and real estateordinary income totaled ¥4.7 billion, and net income attrib-

businesses, Chori underwent a rigorous selection andutable to owners of the parent came to ¥1.2 billion. The

concentration process in order to breathe new life into its

lower ordinary income is mainly attributable to the recording

business. What materialized out of these efforts and whatof provision of allowance for doubtful accounts equivalent tocontinues to live on and serve as the pillars of our operations

the entire amount of accounts receivable of ¥5.1 billion

today are the Fibers, Textiles, and Garments, Chemicals, andpertaining to the Chengxing Group in China. I would like to

Machinery business segments. We have been able to create a

express my sincere apologies for the great deal of concern

solid business foundation through the refinement of theseand inconvenience this has caused to all of our stakehold-three business segments over the years. Meanwhile, theers. Going forward, we will monitor developments in the

global outbreak of COVID-19 in fiscal 2020 has reaffirmed theChengxing Group’s reconstructive bankruptcy proceedings

importance of this foundation. The global impact and unprec-

and make every effort to collect on the chattel mortgage

edented nature of the COVID-19 pandemic has served as aover collective property that has already been obtained andtrue test of strength for Chori’s procurement and sales capa-

on repayments from reconstruction plans. At the outset ofbilities and the long-cultivated global supply chain on whichfiscal 2020, our goal, with the impact of COVID-19 in mind,

they are built. More than anything, the employees at Chori,

was to achieve net sales of ¥200.0 billion and ordinary

who are well versed in their respective fields, and our

income of ¥7.0 billion. While we did not reach these targets,

Kazuo Sakihamaorganizational capabilities that hinge on the strengths of eachordinary income would have amounted to ¥9.7 billion if not

President, CEO & COO,
President and Executive Officer

individual are the reasons why we have been able to over-for the recording of provision of allowance for doubtful

come the challenges presented by COVID-19.

accounts, which would have exceeded its fiscal 2019

For these reasons, I am fully confident that we will con-results. Recognizing this fact, I believe fiscal 2020 was atinue to evolve as a company as we proceed ahead into theyear in which we were able to lay a solid foundation for our

future. I look forward to your continuous support of Chori as

new stage, at which we will consistently deliver ordinary

it continues to adapt to changes in the times and to evolve

income of ¥10.0 billion or more, as set forth in Choriin tune with society.

Innovation Plan 2022.

10

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

I truly appreciate the hard work of our Group employees in

was hit severely by the effects of COVID-19. However, carthis regard. Amid circumstances in which employees were notseats, hygienic materials, and other non-apparel items madeable to come to the office or take business trips, the fact thata steady recovery as the Fibers, Textiles, and Garments

we managed to continue to fulfill our procurement tasks by

Business’s unification of three divisions into one began to bear

maintaining our supply chain and, in particular, the fact that wefruit. Positioning the Fibers, Textiles, and Garments Businesswere able to procure and deliver the materials necessary forunder a single large roof has enabled information on the haz-masks, protective garments, and hygienic materials in a timely

ards of COVID-19 to be shared with Group headquarters andmanner through the collective efforts of our organization

affected areas in need of recovery through the efforts of thedeserve strong recognition.

entire business segment.

As it moves forward, Chori will rigorously enforce risk

Moreover, we bolstered the collective strengths of the­management and other defensive measures and firmly grasp

business in June 2021 by making Sumitex International¥11.0 billion (Fibers, Textiles, and Garments Business: ¥5.2

clearly disclose the social benefits thereof in the form of non-business opportunities in order to position itself to respondCompany Limited a consolidated subsidiary. While the strength

billion; Chemicals Business: ¥5.3 billion; and Machinery

financial indicators, such as the reduction of CO2 emissions.

quickly to the drastic changes taking place in its social andof this company lies in natural fibers and despite its providing

Business: ¥0.5 billion), the target we have set out to achieve

economic environments.

raw materials to all customer categories in the apparel sector

in fiscal 2022, the final year of our current medium-term

forward from the perspective of Chori’s role as a trading

as an original equipment manufacturer (OEM), the customer

management plan.

company. Although we will continue to adhere to the

Recording of Provision of Allowance for Doubtful Accounts
Tohcho Co., Limited, a consolidated subsidiary of CHORI CO., LTD., wasa supplier of chemical raw materials for the Chengxing Group, a chemical
manufacturing company in China. However, due to the sluggish performanceof the Chengxing Group’s main petrochemical business as a result of
COVID-19, payments to Tohcho for raw materials began to fall behindfrom April 2020. The Chori Group quickly proceeded with legal action andfiled a lawsuit to collect the outstanding payments and, after assessing
the recovery status of accounts receivable and the progress of litigation
hold procedures in the first quarter, recorded provision of allowance for
doubtful accounts in the amount of ¥2,474 million, equivalent to around
50% of the entire amount of accounts receivable.
In February and March 2021, a major bank in China filed for reconstructive bankruptcy proceedings against two companies operated by theChengxing Group, for which the court accepted reconstructive bankruptcy
proceedings, and the initial creditors’ meetings related to these proceedings
were held in April 2021. Upon receiving reports from the bankruptcy trustee
on the financial status of each company and conducting a comprehensive
assessment of the financial position of each company, the estimated value ofthe chattel mortgage over collective property that has already been obtained,
and the developments of the reconstructive bankruptcy proceedings, underaccounting procedures provision of allowance for doubtful accounts equivalent to the entire amount of accounts receivable of ¥5,085 million was recorded(an additional amount of ¥2,708 million was recorded in the fourth quarter).

Chengxing GroupJIANGYIN CHENGXING INDUSTRIAL GROUP CO., LTD.

JIANGYIN CHENGOLDPACKAGING MATERIALS
CO., LTD.

Outstanding
payments

JIANGSU CHENGXINGPHOSPH-CHEMICALSGROUP I/E CO., LTD.

Sales of
Outstanding
raw materials payments

Other chemical
manufacturing
companies
Reconstructive bankruptcy
proceedings filed by amajor bank in China

Sales of raw
materials

Tohcho Co., Limited(a consolidated subsidiary of CHORI CO., LTD.)base differs from that of Chori. As such, we can expect the

Meanwhile, I do not expect significant changes going

requests of governments and municipal authorities for thegeneration of synergies in the form of stronger exit strategies.

promotion of telework and the implementation of basic mea-

This new subsidiary also owns a factory in Vietnam, which

Our Direction Going Forward in Anticipation of the
New Normalsures to prevent the spread of the virus, so long as we are

Changes in consumer behavior will most likely persist in thecustomers and our support for newly graduated employees

could be utilized to diversify our production in the near future.
I am looking forward to seeing this synergy make great contributions to our medium- to long-term growth.
Meanwhile, the Chemicals Business also felt the drastic

a trading company, direct face-to-face contact will remaina critical aspect of our business. Our interactions with new

current and post-COVID-19 eras; however, they are believedthat can only be provided on-site will continue to be aneffects of COVID-19 as the cost of various products took ato be short-lived. Meanwhile, the various measures that will be

important part of our business. While valuing the importance

downturn in the first quarter. The market was particularly slug-

enforced to address the most vulnerable areas uncovered asof such on-site activities, we will flexibly adapt to the needs ofgish for the organic chemicals and electronics materials sec-a result of COVID-19 and the issues expected to emerge sev-

the times by providing the option of staggered working hours

tors in the first half of fiscal 2020; however, they were on theeral years from now are sure to speed up the pace of changes

and telework, incorporating online solutions, and implement-road to recovery in the second half. In the area of functionalin society. Among these issues, I am particularly concerned

ing other measures to offer a diverse array of workstyles.

materials, such as intermediates for pharmaceutical products

about the lack of advancement in digitalization within the public

and food additives, we will likely see improvements in thisand private sectors in Japan that has come to light recently.

market in fiscal 2021. In terms of investments in the Chemicals

Chori has been going about its day-to-day business with thisBusiness, we are currently at a standstill due to the impact ofissue in mind for several years now, but we are well aware that

COVID-19. In view of this, however, Chori will remain firmly

this lag in digitalization is a matter of great concern. We have

I would like to sincerely apologize once again for the great

engaged in the lithium compound production project in Chile,declared the consistent delivery of ordinary income of ¥10.0

deal of concern and inconvenience that the actions of thewhich it began undertaking prior to the advent of COVID-19,

billion or more as a major goal for our current medium-term

Chengxing Group in fiscal 2020 have caused to all of ourwhile actively seeking opportunities to invest in growth fields,

management plan. The realization of this goal and the continu-

stakeholders. Regardless of this incident, the management

such as the environment and 5G, moving forward.

ous growth of our business will entail the restructuring of our

foundation and profitability that Chori has built over the years

business through the further advancement of digitalization andare making steady progress as we proceed toward realizingin the sales markets of Central and South America, Europe,

the eventual arrival of digital transformation. As we look ahead

the targets set out in Chori Innovation Plan 2022. I am con-and Africa affected our ability to conduct sales activities in theto the next medium-term management plan, we will speed up

vinced we will be able to demonstrate the proof of our continu-

first half of fiscal 2020. However, owing to the global recovery

the pace of our digitalization while developing infrastructure

ous growth over the years in fiscal 2021, the second year ofof the automotive market, we were able to achieve a level of

conducive to the achievement of our continuous growth as

our current medium-term management plan. I sincerely hopeordinary income that exceeds the target we set out to achieve

a company.

that we continue to receive support and encouragement fromIn the Machinery Business, the enforcement of lockdowns

in fiscal 2022, the final year of Chori Innovation Plan 2022. In

Through this advancement of digitalization, I believe wefiscal 2021, we have gotten off on the right foot thus far, as wemust work to quantify our nonfinancial indicators. At Chori, weare on pace to surpass our fiscal 2020 results.

handle such products as ECO BLUE™ recycled polyester fiber

Despite the challenges posed by COVID-19 to each of ourand plant-based meat (alternative meat derived from plants),

Progress of Chori Innovation Plan 2022

three businesses in the first half of fiscal 2020, we are optimis-

and are participating in a lithium compound production proj-

tic about the future as all three businesses are currently on theect in Chile that relies on a new environment-friendly lithium

The downstream field in the Fibers, Textiles, and Garments

road to recovery. We will continue to make steady strides in

production process. Moving forward, we must not only con-Business, which handles apparel and other finished products,

each business with the goal of achieving ordinary income oftinue to engage in such social contribution activities but also

To All of Our Stakeholders

all of our stakeholders in the years ahead.

Kazuo Sakihama

President, CEO & COO,
President and Executive Officer

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

Medium-Term Management Plan

Becoming a corporate group that continues to evolve and change on

Chori Innovation Plan 2022

a global scale, underpinned by its exceptional capabilities and expertise

Under Chori Innovation Plan 2022, our current medium-term management plan covering the period from fiscal 2020 to fiscal
2022, Chori will rigorously enforce risk management and other defensive measures in order to position itself to respond quickly

280.0

280.0

to the drastic changes taking place in its social and economic environments. We will forge ahead with our basic strategies of

11.0“reinforcement of consolidated management structure,” “creation of next-generation business models,” “corporate gover-

AFTER COVID-19

To a new normal

10.0

nance,” “compliance,” and “strengthening of human resource development structure,” with the aim of realizing sustainable
216.2

growth. By doing so, the Chori Group will become a corporate group that continues to evolve and change on a global scale,
200.0

underpinned by its exceptional capabilities and expertise, and continue to enhance its corporate value.
356.5

 et sales (target)NNet sales (result) rdinary income (target)OOrdinary income (result)

7.0

330.0 329.4(Billions of yen)

291.6
280.0

311.7

300.0
270.9

260.0
248.4
6.8

8.7

8.7

7.5

7.5

6.2

300.0

280.0

Respond instantly to a dramatically changing business environment
Fortify defensive measures

7.8

7.2

7.0

ROA

6.0

(%)

(Ordinary Income Basis)

5.5

ROE
(Net Income Basis)

ROA(Ordinary Income Basis)

7.3

ROE
(Net Income Basis)

10.7

6.0

7.1

10.2

Take steps to address COVID-19

4.7

8.5

6.9

10.7

7.3

9.7

4.1

9.0

8% or more

2.2

11.0

11% or more

Numerical Targets

7.5

10.7

11.0

FY2020

FY2021 (Forecasts)

FY2022 (Targets)

Chori Innovation Plan 2022
FY2014FY2015FY2016

Yakushin 2016

Corporate philosophy

Strengthened the management base,Initiated M&A strategy

FY2017FY2018FY2019Lay a solid foundation for a new stage

Chori Innovation Plan 2019
Strengthening consolidated
management

Converting businessmodel by investing

Consistently deliver ordinary income of ¥10.0 billion or more

Enlargement ofGroup companies

Under Yakushin 2016, our previous medium-term management planof recording provision of allowance for doubtful accounts equivalent

covering the period from fiscal 2014 to fiscal 2016, we fell short of ourto the entire amount of accounts receivable of ¥5.1 billion pertaining

targets due to the decline in overseas trade precipitated by the impact

to the Chengxing Group in China, ordinary income came to ¥4.7of the appreciating Japanese yen in fiscal 2016. Nonetheless, ourbillion, a 46.4% decrease from the previous fiscal year, while bothresults fared well overall thanks to the execution of large-scale M&A,

ROA (ordinary income basis) and ROE (net income attributable tosuch as the consolidation of Miyako Kagaku Co., Ltd. into the Group.

owners of the parent basis) fell temporarily. However, if not for thisUnder Chori Innovation Plan 2019, our previous medium-term

one-time loss, ordinary income would have amounted to ¥9.7 billion.

management plan covering the period from fiscal 2017 to fiscal 2019,

We will continue to promote initiatives such as the consolidation of

we solidified the foundation for reinforcing our consolidated manage-

Sumitex International Company Limited into the Group with a view toment structure by making ASADA U CO., LTD. and KOZAKURA

realizing ordinary income of ¥11.0 billion in fiscal 2022, the final year

SHOKAI CO., LTD. consolidated subsidiaries. This culminated in theof this medium-term management plan.

Enhancing corporate
governancemanagement plan targets one year ahead of schedule.

Standard for Revenue Recognition led to a 34.3% year-on-year
decline in net sales in the first year of the plan. Moreover, as a result

Net Sales

2020, the impact of COVID-19 and the adoption of the Accounting

Due to the lack of discretionfor pricing, Chori records
only the commission
received as a proxy for low
inventory risk transactions
as net sales.

Proxytransactions
Commission
incomeTransactions ofrelated party
Conventional

Trading Amounts
Net Sales

Under Chori Innovation Plan 2022, which commenced in fiscal

Accounting Standard for Revenue Recognition

Commission
incomeTransactions ofrelated party
After adoption of revenue
recognition standard

Net Sales*¥280.0 billion(Reference: Trading Amounts¥350.0 billion)

Ordinary Income¥11.0 billion

Net Income Attributableto Owners of the Parent¥7.3 billion

ROA (Ordinary Income Basis)

8% or more

ROE (Net Income Basis)

11% or more

Payout Ratio

30% or more

* In the first quarter of fiscal 2020, Chori adopted the
Accounting Standard for Revenue Recognition (ASBJ
Statement No. 29, issued on March 30, 2018).

Continuing to implement CHORI Innovation
Activities (Companywide activities)

Awareness of External Business Environment (Fiscal 2020)
Chori will rigorously enforce risk management and other defensive measures and firmly grasp business opportunities inorder to position itself to respond quickly to the drastic changes taking place in its social and economic environments.

Positive Impacts

Negative Impacts• Increased demand for car seats due to recovery
in automobile production•S teady demand for hygienic materials• Increased demand for sports apparel due toincreased health awareness•D emand for apparel declined due tostay-at-home orders

Chemicals
Business• Strong demand for pharmaceutical intermediates,etc.
• Increased demand for automobile-related materials
due to recovery in automobile production• Demand for cosmetics and food additives declined
due to reduced store opening hours and people’s
refraining from going outdoors

MachineryBusiness• Recovery of vehicle markets in Europe, South andCentral America, and Africa• Stringent conditions for vessels, soaring container
shipping rates, etc.

Fibers, Textiles,
and Garments
Businessachievement of our highest-ever results for ordinary income and net
income attributable to owners of the parent in fiscal 2018 and of our

FY2022

14

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

3

The Basic Strategies of Chori Innovation Plan 2022

Corporate Governance

Chori will press ahead with the following five basic strategies in its bid to become a corporate group that continues to

At Chori, we have a Governance Committee in place, which mainly consists of outside direc-

evolve on a global scale, underpinned by its exceptional capabilities and expertise, while addressing the drasticallytors and serves as an advisory body to the Board of Directors. Through the enhancement andchanging social environment.

1strengthening of corporate governance, we will pursue further increases in corporate value,
while delivering performance-based dividends of 30% or more. Meanwhile, our basic dividend

Reinforcement of Consolidated Management Structure

policy is to provide performance-based dividends in accordance with the standards for net
income attributable to owners of the parent from the perspectives of flexibly returning profits
to shareholders and ensuring stable operations and finances while securing appropriate funds

From the perspective of reinforcing the consolidated management structure, Chori willConsolidated management centered on
global businessincrease the consolidated-to-nonconsolidated ordinary income ratio, enhance thecapabilities of core subsidiaries, and promote Group management.

Strengthening of Consolidated-to-Nonconsolidated
Ordinary Income RatioC onsolidated management
P ortfolio management

Projected toincrease
1.6 times

Digital management(Billions of yen)for investments in growth strategies.

Trends in per-Share Dividend (Annual)
100

84

90

60

5.4

7.5 6.0

FY2016FY20177.0

30

Consolidated ordinary income

2

8.7

6.1

FY20188.7

FY2019

4.7

6.8

40

2.2

FY2020

FY2022 (Targets)

Nonconsolidated ordinary income

Creation of Next-Generation Business Models

33

34

40

36

and areas. In particular, we will proceed with the business investments outlined below centered on the themes of the environment, health, sustainability, and cutting-edge technology.

Investments in and development of
new businesses

37

200

24

20

100

0

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022 0(Result) (Result) (Result) (Result) (Result) (Result) (Result) (Result) (Result) (Forecast) (Target) (FY)Dividends per year (left scale)We will maintain the Business Investment Committee and proactively invest in growth fields

500

300

11.0
6.4

4

Net income per share (right scale)violations, and strengthening of supervisory functions at consolidated
subsidiaries, we ensure thorough compliance throughout our operations.

Environmental and recycling, health, hygiene,
and materials fields

Chemicals Business

Environmental, 5G-related, electronics and battery materials,
healthcare, and agricultural fields

laws, regulations, and customs of Japan and other countries and instill

Machinery Business

Global market development

legal compliance manuals for the purpose of preventing legal violations.

In June 2021, the Chori Group acquired all shares of Sumitex
International Company Limited from Sumitomo Corporationand made it a wholly owned consolidated subsidiary. Sumitex
International, which originated as a business that handled raw
materials for fibers (cotton), is a trading company specializing
in natural fibers that provides such raw materials to all customer categories in the apparel sector as an original equipment manufacturer (OEM). We are expecting to createsynergies with this globally expanding company that boasts a
production network consisting of Japan and various othercountries in Asia.

Committee
MemberMorikawa

Committee
MemberSakihama(Independent Director) (Independent Director) (President, CEO & COO)

Outside director
Appointment or
dismissal of directors
and executive officers

Compensation of
directors andexecutive officers

Successor planningand training

Compensation
made individually

As we continue to evolve our business globally, we will adhere to thesuch awareness in our employees through internal training sessions and5

Assessment oftransactions andother dealings withthe parent
company groupReinforcement of corporate ethics
E limination of legal violations
G lobal risk management
S trengthening of supervisory functions at
consolidated subsidiaries

Strengthening of Human Resource Development Structure

Guided by its vision for human resources, “Utilize people, and be useful to them. Nurture

Overview of Sumitex International Company Limited

people, and develop with them. Connect people, and join together with them,” Chori regards
each and every one of its Group employees as its most valuable management resource andN urture of human resources fornext generation

strives to ensure their health and well-being. Further, by promoting the following measures inPromotion of health and productivity
management

3-26, Kanda Nishiki-cho, Chiyoda-ku, Tokyo

line with the key principles of “utilize,” “nurture,” and “connect,” we will cultivate our human(Please see page 44 for details)¥830 million

resources for the next generation.

Name and Title ofRepresentative

President, CEO & COO / President and Executive Officer
Masahiro Takamaru

Location
CapitalDate of Establishment March 1987 (founded in 1898)
Details of Business

Manufacturing and distribution of textile-related products (clothing,fabric materials, etc.)

Employees

232 (as of April 1, 2021)

Overseas Bases

China (Shanghai, Qingdao), Hong Kong, and Vietnam (Ho Chi Minh City)

Website(in Japanese only)

http://www.stx.co.jp/

DirectorThrough the reinforcement of corporate ethics, elimination of legal

M&A

Fibers, Textiles,
and Garments Business

Acquisition of Sumitex International
Company Limited

Committee
Chairman
SawanoCompliance

Focusing on Investment in Growth Fields and Areas

TOPIC

Governance Committee

63

60

6

CHORI Innovation Activities(Companywide activities)

400

59
9

Group governanceEnhancement of Chori’s brand value(Yen)(FY2020–FY2022)

80

12

C
 ontinuation of stock-based
compensation and enhancement thereof

Payout ratio

30% or more

Includes commemorative
dividend of ¥10(Yen)E stablishment of Governance CommitteeImprovement of dividend policy

Nurture of Human Resources for Next Generation

Utilize

NurtureConnectR ealize diverse workstyles
Stimulate communication
through one-on-one interviewsN urture future generations ofhuman resources
Nurture employees of ouroverseas offices
Promote active roles for women nergize and unify the Chori
EGroup through mobilization of
employees within the Group

16

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CHORI CO., LTD.

Tsumugu Report 2021

Overview of Chori

Financial Strategy

dialogues. However, when the time comes for everyone to be able

and other growth areas. While doing so, we will continue to firmly

to move freely from one place to another, we will certainly takeengage and expand our efforts in ongoing projects such as the lithium­advantage of every opportunity to invest in growth fields, such as 5G,

compound production project in Chile and ECO BLUE™ recycledenvironmental, and hygiene, as well as in the ASEAN region, Africa,

polyester fiber.

Chori’s Financial Position

We will continue on our path
toward our new stage
on the strength of our solid equity.

In terms of our financial base, we continue to maintain a high equity

hinges on the accumulation of profits, our basic policy is to maintainratio, achieving 53.2% in fiscal 2020, even after recording provision

it at a positive level.

of allowance for doubtful accounts. During the period of our Reborn

Shigemasa Yabu
Director, Senior Managing Executive Officer

Management Plan, from fiscal 2003 to fiscal 2004, our equity ratio was

Financial Soundness

a mere 1% and our interest-bearing debt was ¥120.0 billion. In other(Billions of yen)words, Chori was at its lowest point when it began to rebuild the orga-

120

nization. However, we have built Chori into a company that continues

80

to maintain an equity ratio of 50% or more to this very day. Therefore,
unlike in years past, our level of capital has not become a major concern, even in light of COVID-19. Moreover, investments will be carriedout within the framework of maintaining our financial soundness.

Overview and Assessment of Fiscal 2020 Results

Looking back on the years of hardship Chori has suffered, simply

At the end of May 2020, Chori announced its targets for Chori

Chengxing Group in China, ROA (ordinary income basis) and ROE

raising the level of ROE will not be enough. I believe we must solidify

Innovation Plan 2022, which reflect the impact of COVID-19, after(net income attributable to owners of the parent basis) both declined

our equity, thereby sustaining our business, and enhance our corpo-

the announcement was postponed from its initially scheduled datetemporarily; however, earnings in our main business started to rise inrate value, and this is one way of giving back to our stakeholders.

at the end of April 2020 due to the pandemic. Despite the effects ofthe second quarter on the back of cost-cutting measures.

Given that Chori is a trading company, we are able to flexibly

Accordingly, our efforts to lay a solid foundation for our new stage

manage cash flows in accordance with changes in net sales andrespective targets thanks to the strenuous efforts of our businessof consistently delivering ordinary income of ¥10.0 billion or more—atransaction makeup. However, due to the fact that free cash flow

segments. While net sales ended up falling below that in fiscal 2019,major theme of the current medium-term management plan—madeit bounced back in the third quarter. Meanwhile, due to the recording

favorable progress, as we are within reach of our ordinary incomeof provision of allowance for doubtful accounts equivalent to the entire

target of ¥10.0 billion.

COVID-19, our fiscal 2020 results came very close to reaching their

Changes in Consolidated Business Results (on a Quarterly Basis)
1Q
Net Sales
After Adoption of AccountingStandard for Revenue Recognition*
Operating Income (Loss)
Ordinary Income (Loss)
Excluding the Provision of
Allowance for Doubtful Accounts
Net Income (Loss) Attributable to
Owners of the Parent

2Q

3Q

4Q

(Billions of yen)

Full-year
total

(%)

110.6

75

53.2

50.0

58.8

57.2

50
25

40
0

0

(12.0)(15.5)–40

Mar. 31, 2020

Mar. 31, 2021

Total assets

Net interest-bearing debt

Total equity

Equity ratio

Profitability / Capital Efficiency
ROA (Ordinary Income Basis)
ROA (Net Income Basis)
ROE (Net Income Basis)Mar. 31, 2020

Mar. 31, 2021

Difference

7.5%

4.1%

–3.3%

5.2%

1.1%

–4.1%

11.0%

2.2%

–8.8%

Shareholder Returns

amount of accounts receivable of ¥5.1 billion pertaining to the

FY2019114.4

FY2020

1Q

2Q

3Q

4Q

Full-year
total

Our basic policy on shareholder returns is to flexibly return profits toaccounts, a year-end dividend of ¥23 per share (for an annual divi-shareholders while securing a sufficient level of capital for investments

dend of ¥37 per share) was paid as announced on February 8, 2021

in growth strategies, in addition to providing performance-based

for fiscal 2020, upon a comprehensive evaluation of our recent perfor-

dividends commensurate with the standards for net income attribut-mance trends and sound financial details. While our dividend pay-

83.2

81.2

85.1

79.9

329.4

49.0

53.2

55.2

58.9

216.2

able to owners of the parent from the perspective of ensuring stablements decreased in fiscal 2020, we will steadily promote various

62.1

63.1

61.7

61.6

248.5

49.0

53.2

55.2

58.9

216.2

operations and finances. In addition, our dividend payout ratio wasmeasures under our current medium-term management plan and,

2.3
2.4

2.3
2.5

2.1
2.3

1.5
1.5

8.2
8.7

(0.9)
(0.7)

2.5
2.5

2.4
2.5

(0.3)
0.3

3.7
4.7

increased from 25% or more to 30% or more in fiscal 2020.

in turn, provide an annual dividend of ¥84 per share, which we are

1.8

2.5

2.5

2.9

9.7

(1.2)

1.4

1.6

(0.6)

1.2

1.6

1.6

1.5

1.4

6.1

Note: In the first quarter of fiscal 2020, Chori adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, issued on March 30, 2018).

Policy on Growth Investments

Despite the recording of provision of allowance for doubtful

targeting for fiscal 2021 (please refer to page 16 for more details).

In Anticipation of the New Normal
Chori has designated ordinary income as one of its key performanceachieve. Moreover, we improved our financial stability and maintained a

indicators (KPIs) to serve as a true measure of the profitability of its

certain level of equity in fiscal 2020 as we drew on the lessons learned

core businesses. We also place emphasis on ROA (ordinary income

over our long history. We have established a framework for embracing

At Chori, our basic policy on business investments is to ensure exten-

the M&A Promotion Committee, headed by the general manager ofbasis) as we make it a general rule not to retain assets that are

new challenges on the back of our stable equity, and I therefore hopesive marketing and risk management, in addition to adequate returns.

the Corporate Planning Division, discuss and deliberate on the appro-

deemed unnecessary to our business. These are key metrics thatyou look forward to the continuous growth of Chori in the years ahead.

Investments are determined on the basis of their impact on our finan-

priateness of risk-return assessments and plans and the feasibility ofwill continue to remain intact in the post-COVID-19 era.

cial position while minimizing the risks involved. This policy stems fromimportant investments and M&As.

our unfortunate experience of incurring a massive amount of losses in

In terms of our focus on investing in growth fields and areas as a

At the same time, we will fortify defensive measures and strengthen

Chori Innovation Plan 2022 Targets
FY2020Resultsrisk management by closely monitoring any potential human rights(Billions of yen)

FY2021
Forecasts

FY2022
Targets

our noncore businesses prior to the year 2000. Our investments arepart of our “creation of next-generation business models,” a basic

issues that may occur along our supply chain and which impact our

Net Sales

216.2

280.0

280.0

generally made within the perimeters of our core businesses of Fibers,

strategy of Chori Innovation Plan 2022, we are currently in the process

reputation, as well as our compliance, credit control, and legal risk.

Ordinary Income

4.7

10.0

11.0

Textiles, and Garments, Chemicals, and Machinery, while emphasizingof determining such opportunities as a result of COVID-19. Our devel-

Looking back on fiscal 2020, I believe we have positioned

1.2

6.8

7.3

the importance of marketing. Furthermore, the Business Investment

opment of new businesses has also been put on hold due to theourselves to be fully able to consistently deliver ordinary income of

Net Income Attributable to
Owners of the Parent

Committee, chaired by the president and representative director, andeffects of COVID-19 because of our inability to have face-to-face¥10.0 billion or more, a goal we are continuously striving set out to

ROA (Ordinary Income Basis)
ROE (Net Income Basis)

4.1%
2.2%

9.0% 8% or more
11.0% 11% or more18