INTEGRATEDREPORTIntroduction

Introduction

Foreword

We will further enhance sustainability management
under the new system, carrying on the founding
principles of our organization.
Our history can be traced back to 1916, when Momosuke Fukuzawa, our founder, decided touse the electricity produced by hydroelectric power generation to build an electric arc furnacesteelmaking company. When founder Momosuke Fukuzawa became president of Nagoya Dento
Co., Ltd., he established the “GOKAI-JUSSOKU (Ten Guiding Tenets)” for his employees, thefirst of which was the following words:“The happiness we enjoy is thanks to the patronage of many customers”
Since our company’s establishment more than 100 years ago, we have carried on the traditionof appreciating our customers as the DNA of Daido Steel, while also refining our “monozukuri”(manufacturing) skills and giving back to society.
Specialty steel has excellent functionality and design, and it can be used creatively to produce
a wide range of materials. Our products are used in many industries. Our mission and purpose is
to listen carefully to the voices of our customers (= society) and continue to provide products that
support people’s lives, an attitude that we have cherished since our founding.
In light of this, on the occasion of our 100th anniversary, we updated our management
philosophy to “Pursuing the potential of materials to support our future,” while also creating theGroup’s slogan, “Beyond the Special.” We want you to feel the Daido Steel Group’s enthusiasm
for maximizing material potential and continuing on with “value that goes beyond special.”
The world is currently faced with numerous problems, including those related to energy
and global warming. Without each company utilizing its knowledge and experience to promotesustainability initiatives and help achieve the SDGs, a sustainable future will not be possible. We
carefully listen to the voices of society and open up the possibilities of materials. With these as ourCompany’s founding principles, we will advance sustainability initiatives under President Shimizu
and contribute to increasing corporate value and achieving a sustainable future.
We kindly ask for the continued support and understanding of all our stakeholders.

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Corporate Data

Editorial policy

Introduction

As a reporting tool to explain its efforts to contribute tosustainable development from a long-term perspective based on
ESG, Daido Steel Co., Ltd. initially published an Environmental
Report, which was replaced in 2006 with the CSR Report, andthen in 2020 with the Daido Steel Sustainability Report. From
2021, we have been publishing an integrated report that cancomprehensively communicate the Company’s value creation
process, strategies, and materiality progress for realizing an
increase in corporate value in the medium- to long-term, as wellas the Company’s initiatives in general.
We expect the readers of this report to be the Company’s
stakeholders (customers, local communities, shareholders/investors, suppliers, employees, etc., all persons related incompany business), public institutions, media, and educational
institutions, etc. The scope of this report covers Daido Steel Co.,
Ltd. and its group companies, and mainly contains information
related to “strategy” and “sustainability” from a long-term
perspective.

Foreword･･････････････････････････････････････････ 1
Corporate Philosophy Structure/Business Direction
for Corporate Value Enhancement･････････････････････････ 3
Message from Top Management･･････････････････････････ 5

Reporting period
April 1, 2022 to March 31, 2023 (includes some fiscal 2023
activities and past results)
Referenced guidelines
VRF “Sustainability Reporting Standards”
IFRS Foundation “International Integrated Reporting Framework”
Ministry of the Environment “Environmental Reporting Guidelines
2018”
Ministry of Economy, Trade and Industry “Guidance forCollaborative Value Creation”
Publication date
September 2023 (last published in September 2022)

Daido Steel’s Value Creation Story
107-Year History of Daido Steel･････････････････････････ 11
Overview of Daido Steel Group･･････････････････････････ 13
Relationship of Daido Steel and Society････････････････････ 15
Value Creation Process･･･････････････････････････････ 17
Daido Steel’s Core Competency Creates“Value That Goes beyond the Special”････････････････････ 19
One Year at Daido Steel･･･････････････････････････････ 21
Financial/Non-financial Highlights････････････････････････ 23

Innovation to Realize a Green Society
Sustainability Management･ ･･･････････････････････････ 25
Sustainability Basic Policy and Materiality･ ･････････････････ 29
2023 Medium-Term Management Plan Progress･････････････ 31
R&D and Intellectual Property Strategies･･･････････････････ 35
Manufacturing Technology Strategy･･････････････････････ 39
Human Resource Strategy･････････････････････････････ 43
DX Strategy･･･････････････････････････････････････ 47
Financial Strategy･･･････････････････････････････････ 51
Business Strategy: Specialty Steel Business Division &Tool Steel Business Division････････････････････････････ 55
Business Strategy: Fabricated Materials Business Division･･･････ 57
Business Strategy: Functional Products Business Division･･･････ 59
Business Strategy: Machinery Division･････････････････････ 61

Contribution to Realizing a Green Society
Response to Risks and Opportunities･･････････････････････ 63
Progress of Actions for SDGs and Materiality････････････････ 65
Preservation of the Global Environment
Initiatives to Address Climate Change･･･････････････････ 67
Transition to a Circular Economy･･････････････････････ 71
Helping to Protect the Global Environment with
Daido Steel’s High-performance Products and Technology････ 73
Responsibilities and Contributions to Society
Respect for Human Rights･ ･････････････････････････ 75
Elimination of Occupational Accidents･･････････････････ 77
Promotion of Health and Productivity Management･ ････････ 79
Promotion of Diversity･ ････････････････････････････ 81
Work Style Reforms･･･････････････････････････････ 84
Social Contribution Initiatives･････････････････････････ 85
Supply Chain Management･･････････････････････････ 87

Takeshi Ishiguro
Chairperson of the Board of Directors,
Representative Executive Director

Thoughts behind the cover design

The press conference announcing the change of president(February 2023)

Contribution to Realizing a
Green Society

The design combines a bridge-like pattern and the slogan“Beyond the Special.”
This represents our convictionthat by offering “value that goesbeyond the special,” we provide
a “bridge” that leads to everyday
life and industrial development.
At the same time, the design
symbolizes Daido Steel Group
as a team striving to reach ourtargets as one on a global scale.

Strengthening GovernanceDiscussion between Outside Directors and Chairperson of
the Board of Directors, Representative Executive Director･････ 89Strengthening of Corporate Governance･････････････････ 93
List of Officers･･･････････････････････････････････ 99
Risk Management･･････････････････････････････ 101
Compliance･･･････････････････････････････････ 104
Stable Supply of High-quality Products･･････････････ 107
Stakeholder Communication･･････････････････････ 109

Corporate Data
Ten-year Financial Summary･･････････････････････････ 111
Company Overview･･････････････････････････････ 113
List of Group Companies･････････････････････････ 114

DAIDO STEEL GROUP INTEGRATED REPORT 2023

2

Introduction

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Corporate Philosophy Structure
Daido Steel Way

The Daido Steel Group aims to enhance corporate value by practicing the
Daido Steel Way (corporate philosophy structure), which systematizes its
vision and the basis of its actions.

Realization ofManagement Philosophy

Business Direction for
Corporate Value Enhancement
Looking toward carbon neutrality in 2050, the Company aims for a 2030
vision to “Pursue high-performance specialty steel and contribute to‘realization of a green society’.”

From the past to the present, we have continued to support our future.
In order to do this, we will continue pursuing materials’ potential and what is beyond the special.

2050

We will further strengthen our relationship with stakeholders and makeefforts to realize our vision together.

Aimed at the Next Generation“Achieving carbon neutrality”

2030

From the present to 2030

What should we do to realize the value of our existence?

Daido SteelGroup
Management
Philosophy

Pursuing the potential ofmaterials,“Pursue high-performance
specialty steel andcontribute to ‘realizing agreen society’”

Backcasting
After establishing our
future targets, we lookback at the present
from our future goals
and build strategies

The value of our existence for society and why do we exist?

to support our future

Present

MissionPurpose2030 Vision

We will advance into the future
while focusing on the goals in our
medium-term management plan,
including “boosting earning
power,” “ESG management
promotion,” and “resolving
materiality”

What we aim to accomplish in the process of realizing our purpose

Pursue high-performance
specialty steel and contribute to“realizing a green society”

2016

2030 Vision

1916

Vision100th Year
Anniversary of
Daido Steel’s
Founding

Utilizing the “core competencies”
we have built to realize our vision
Co-creation
capabilities

Birth

Conduct
Guidelines
Value
Values that each individualholds dear as a Daido person

・Aim High・Sincere Action
・Personal Growth・Team Strengths
・Open to Challenges

Various Policies,
Internal Regulations,etc.
Daido Steel Corporate
Code of Ethics

Founder’s mindset andinherited DNA
3

DAIDO STEEL GROUP INTEGRATED REPORT 2023

FounderMomosuke Fukuzawa“Frontier Mindset”“Customer First”
Specific behavioral standards,
policies, and rules forofficers and employees

Development
capabilities

Technologicalcapabilities

Core competency▶P.19

107-Year History of
Daido Steel▶P.11

2023 Medium-Term Management Plan & the Next medium-term management plan

Resolving materiality

Ethical rules that
the Company must follow

Our unchanging founding
principles have been passed
down to our employees

Manufacturing
capabilities

Boostearning power

ESG
management
promotion

2023 Medium-Term Management Plan▶P.31

1. Preservation of the global environment(business activities)
2. Preservation of the global environment(product supply)
3. Responsibilities and contributions tosociety
4. Strengthening governanceMateriality▶P.30

DAIDO STEEL GROUP INTEGRATED REPORT 2023

4

Introduction

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Top Message

We will continue to provide ourwe support our future.
My name is Tetsuya Shimizu. I assumed the presidency ofDaido Steel Group in June 2023.
Throughout our Company’s 107-year history, we havesupplied specialty steel tailored to the needs of each era while
adhering to the “customer first” philosophy of our founder,
Momosuke Fukuzawa. From our founding until the 1950s,
amidst war and other crises, our operations spanned a varietyof business sectors. These included manufacturing goods forthe military as well as the general public. The Company
continued to grow from the 1960s onward, when the use of
automotive vehicles grew more prevalent. This era saw
technological advances and increased vehicle production,
which likewise increased demand for specialty steel materials
in automotive components, such as engines andtransmissions.
Today, society is entering a new era as it transitions toward
decarbonization. The landscape of specialty steel demand isagain experiencing major changes. We must sail the seas ofchange as well. Whatever direction society takes, specialty
steel will remain an essential material that upholds social
infrastructures. Our Company has an important mission tostay abreast of changes and continue to provide “special
value”—namely, the materials that society needs going
forward. We will fulfill this mission without forgetting our
founding philosophies of putting “the customer first” and“working closely with customers—that is, society—to
anticipate their needs.” As I lead this Company, I willencourage employees in every position to continue to adhere
to these philosophies.

customers with special value as
Mission as President
I have worked in research and development for many years.
Rather than our primary type of specialty steel, which is
structural steel for automotive applications, I was involved
in developing what our Company calls “high-performancematerials,” including stainless steels and superalloys. I
developed and proposed materials after listening to whatcustomers wanted and thinking about what materials would
match their needs.
One of the most memorable experiences I had was when I
was involved in the development of stainless steel (DHS1)
for hard disk drives (HDD) in 1998. I witnessed firsthandhow different that industry’s timelines and approaches werefrom the automotive industry. A month for us was like ayear for them. For example, a lead time of three months todevelop and produce a steel sample was viewed asoutrageous. It impressed upon me the importance ofunderstanding an industry’s sense of speed and culture whenattempting to expand into or enter that industry. During thatexperience, I was also struck by Daido Steel Group’s
extraordinary ability to work together as unified whole. The
factories, sales teams, technical services, Corporate
Research & Development Center and overseas subsidiaries
all worked on steel development as one to make sure thecustomer’s expectations were met. The factories wereparticularly quick to modify equipment or change processes.
Though we encountered some difficulties in the beginning,
we managed to recover and surpass our competitors,
eventually producing what became the world’s de facto
standard. The experience showed me how we can be more
powerful than we imagine when we work together. The
reason we were able to come together as one was because of
our shared mission to meet customers’ needs. It’s rooted in
our Company’s DNA. We have to stay true to our roots,
putting “our customers first” and “working closely withthem —that is, society— to anticipate their needs.”
In 2014, while heading the marketing department as theGeneral Manager of the Material Solutions Department, I
was involved in the challenging tasks of increasing sales in
new markets and identifying business opportunities for all
of Daido Steel Group’s products. Initially, we had difficulty
bridging the gaps between different business divisions, but
it was a valuable experience to see how collaboration
improved as we worked together, broadening perspectives
and eventually leading to a change in company culture. I
believe it is my mission to use these experiences to help ourCompany more rapidly identify practical uses for new
products as well as launch and grow new businesses.

We are going to produce
the materials that ourcustomers and societyneed.

Tetsuya Shimizu
President & CEO,
Representative Executive Director

5

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

6

Introduction

Introduction

Endless Possibilities Forged by Specialty Steels
Specialty steels are essential to our lives but are usuallyhidden from view. They can be found in computer andautomotive components and are also in devices andequipment used in applications like power generation andconstruction. As a material, specialty steels are so essential,that if they were to disappear, our current way of life would
disappear with them. In fact, even the part that supports theball in everyday ballpoint pens is made from our Company’s
specialty steel. Japanese ballpoint pens are renowned aroundthe world for their smooth writing capabilities and longproduct lifespans. This is because highly precise andcomplex processing is applied to the stainless steel used inthem to maintain its high performance. Specialty steels havenumerous applications like this, and the ways they can be
combined open up endless possibilities.
The value of specialty steels resides in their incredible
functionality. There are many materials available, but
specialty steels stand out for their exceptional variation anddesign characteristics. The functionality required of steel
has changed dramatically with each new era, but our
Company has supported society’s progress and development
by closely following costumers’—or rather, society’s—
needs over time and maintaining a frontier mindset in theface of diverse changes. Using our manufacturing processes
for high-mix, low-volume production, our Company’scompetitive edge is clear in how much we can cut costs andthe value we deliver to meet customers’ needs.
Today, changes in the global climate are greater and more
severe than ever before. New demands and highexpectations are being placed on the functional superiorityof specialty steels. In particular, society is changing in many
ways as it moves toward decarbonization, such as shifting toelectric vehicles and clean energy sources. Many obstacles
lie on the path to becoming a green society, and ourCompany cannot overcome them alone. We will work in
partnership with all our stakeholders and with a profoundsense of mission due to our position at the very top of the
supply chain.
The global supply chain is being rebuilt as the U.S. andChina decouple their economies. We are building a morestable supply chain that relies on domestic procurement tohelp us fulfill our mission from the standpoint of economic
security and increase our business opportunities. In practicalterms, the government has defined 11 “specified important
goods” that are critical for survival, as they are widely
depended on by the citizens of Japan in their daily lives andin their economic activities. Among these, permanent
magnets, semiconductors, and aircraft components overlap
with our Company’s priority growth products. Also, storage
batteries, machine tools, industrial robots, and shipcomponents are categories of goods that make heavy use of
our Company’s specialty steels. We supply materials to awide range of industries, including automotive, aircraft,energy, industrial machinery, electronics, and medical
devices. It is extremely important for the medium- to longterm growth of both Japan and Japanese companies throughJapanese manufacturing that we make our supply chain
more resilient. This will ensure we fulfill our supplier

We always aspire to deliver
value that goes beyond
customers’ needs.

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DAIDO STEEL GROUP INTEGRATED REPORT 2023

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

responsibilities to overseas and domestic customers—aswell as industry as a whole. We will also help improve our
supply chain’s resilience in all aspects of all our businessContribution to Realizing a
Green Society

Corporate Data

activities, including technological development, equipment
investment, and personnel acquisition and training.

Realizing a Green Society
Efforts to curb global warming have grown more serious,and societal structures are being transformed as we movetoward the goal of reducing CO2 emissions. In the future,electric vehicles (EV) are expected to become moreprevalent, and hydrogen is attracting attention as a clean
energy source. Demand for semiconductors is also expected
to see medium- to long-term growth to accommodate
increased digitalization, in fields like information andcommunications. In line with these changes, many products
are likely to have higher demand in the future, specifically
CASE-related products, like steel used to make gears in
e-Axle gear reducers, magnets for EV motors, highperformance soft magnetic materials, and anode materials
for lithium-ion batteries. Further, hydrogen embrittlement
resistance steel holds promise in the fields ofsemiconductor-related products and clean energy. We are
currently developing these materials while using equipmentthat can assess material properties to ensure they meetcustomer needs. We share these assessment results withcustomers throughout the process.
I would like our Group to particularly focus on magnetic
materials and hydrogen. We already have a picture of theuses and demand for magnetic materials, and how wedevelop these technologies and businesses going forward
will be crucial to our success. Conversely, societal
applications of hydrogen are not widely understood, andour objective at this point is to explore what we can do in
the hydrogen sector and expand our opportunities.
Turnaround times in these fields differ, but we can expect
changes in societal structures to generate greater demand in
the future, and we will help build a green society byensuring customers are provided with the materials theyneed.
Our key management concerns as we try to avoid fallingbehind the tide of change in carbon neutrality and othergreen initiatives are how fast we can change and how short
we can make the time between when we realize we have tochange and when we actually change. Fields requiring our

specialty steels are going to expand as we move toward agreen society. This will not be limited to the automotive
industry, and our relationship with the industrial machineryand electrical/electronic industries as well as the energy
industry will become more important. We have to change
our mindsets and behaviors and adjust our development tomatch the pace of change in each industry. It is going to bevery challenging to change our mindsets and behaviors, but
all our employees have to embrace this mentality for us toenter new fields. We are also promoting the use of digitaltransformation (DX) tools, including AI, as a means of
updating our mindsets and behaviors and also to increase
our speed of change.
Please see the medium-term business plan on page 31 forrecent business performance trends.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

8

Introduction

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Strengthening Sustainability and GovernanceEfforts to reduce the amount of CO2 emitted from ouroperations is also critical to realizing a green society. Our
Company melts scrap iron in electric furnaces tomanufacture specialty steels. This method emits about
one-quarter the amount of CO2 that methods using blast
furnaces do. However, the electric furnace method
consumes a significant amount of energy, and ourmanufacturing processes emit close to 900,000 tons of CO2
annually. Nearly 90% of our total emissions come fromelectric and city gas utilities. Reducing and decarbonizing
our electric and city gas consumption is the most importantfactor for us to become carbon neutral.
In response to this situation, we announced the Daido
Carbon Neutral Challenge in April 2021 and set goals to cut
our CO2 emissions 50% from their 2013 levels by 2030 andto be carbon neutral by 2050. Two-thirds of our 900,000
tons of emissions are Scope 2*1, and we plan to shift asmuch as possible to electricity generated by renewableenergy. The remaining third is Scope1*2, and we plan to tap
into the energy-saving technologies of our engineering
department to improve the combustion efficiency of our

furnaces and increase productivity. We have a clear
roadmap toward halving our emissions by 2030. To becomecarbon neutral by 2050, we need to participate in national
and industry initiatives and keep an eye on newtechnological developments. Our strategy is to pursue
economically rational options as we look for the bestsolutions.
In addition to environmental goals, we are steadily
promoting due diligence and other initiatives in line with
our new human rights and anti-bribery policies. In the realmof corporate governance, we have strengthened several
measures, including transitioning to a company with an
Audit & Supervisory Committee, instituting evaluations of
the Board of Directors’ effectiveness, reviewing officer
remuneration, and improving succession planning. Goingforward, I would like to focus on dialoguing withshareholders and investors, as this was difficult to do during
the COVID-19 pandemic. I will lead the dialogue withoverseas investors myself, using this integrated report as atool to facilitate that dialogue.

*1 Scope 2: Indirect CO2 emissions from using electricity or other forms of energy supplied by third parties.
*2 Scope 1: Direct CO2 emissions from fuel combustion, etc.

Personnel Development through Mental and Physical Health
One reason our specialty steels have been so well received
in global markets is our longheld commitment to always
add our own original touches. This commitment extends tothe factory floor. When we purchase manufacturing
equipment, we alter it using our company’s own original
innovations before using it rather than installing it as-is.
Our Company has persevered in development even whenothers around us were critical of our chances of success,which has resulted in us creating entirely new products,
with some technologies even becoming widely used asindustry standards. This company culture enables us toprovide customers with considerable additional value
through high-mix, low-volume production. We have
employees who find this very rewarding, and they innovaterelentlessly as an automatic part of their work. We believe
employees are the source of our growth, and it is important
to improve their mental and physical wellbeing. We also
place a strong emphasis on personnel development and

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DAIDO STEEL GROUP INTEGRATED REPORT 2023

diversity. Mental and physical wellbeing is the foundationof happiness, and I want employees to be conscious of that.
I also encourage them to care about the health of theircolleagues and families.
To aid in personnel development, we have been operating
the Daido Steel Technical Training School since 1952. It
was established as a training facility for new recruits who
had graduated from high school. The school teaches basic
knowledge and technical skills to cultivate experts inspecialty steel manufacturing. It also supports students inbuilding their own independent lives and prepares them tobecome businesspeople and members of society. The school
educates employees through an intensive curriculum over a
one-year training period. We are sometimes asked why wecontinue such an expensive program, but in my view thistype of training is indispensable. We handle large equipmentat our manufacturing sites, and employees must learn how
to operate them safely. Also, acquiring a sense of social

I want us to be attentive to each
employee’s thoughts and opinions,taking into consideration theirposition and job responsibilities.

morality is critical personnel development not only for
those in our company but also for society as a whole.
Diversity is also important. When I was working in the
Material Solutions Department, I was in charge ofmarketing products in the Middle East and traveled to thearea. The cultural norms there are completely different fromJapan, and I struggled in several aspects of doing business.
I learned to respond flexibly, without presuppositions,because people have their own values and ways of thinking.
This experience impressed upon me how important
diversity is.
It is getting harder in Japan to acquire good personnel
because of our declining birthrate and aging society. It is

critical that we create a work environment where people
recognize and respect each other’s differences, regardlessof gender, nationality, values, sexual orientation, or
disability. This includes hiring women and foreign
nationals, as well as strengthening our previously
implemented year-round and mid-career hiring practices.
For example, we are working to create an environment thatis conducive to achieving our goal of doubling women in
management positions by 2030 (from 15 to 30). We also
have initiatives in place for global human resource
development, like overseas training, study abroad andassistance in attaining qualifications.

To Our Stakeholders
Our Company engages in a broad range of businessactivities in the materials industry. We are confident that wewill continue to evolve with society and are dedicated tobuilding a better future for all its members. We embrace thechallenges embodied by Daido Steel Group’s slogan of“Beyond the Special” as well as our 2030 vision to “Pursue
high-performance specialty steel and contribute to‘realization of a green society’.” We will achieve this vision
by promoting integrated group management, boostingearning power, and pursuing ESG initiatives. We are also
committed to communicating our robust growth potential
and indispensable role in society to all our stakeholders.

We invite you to share in our vision of future growth
for the Daido Steel Group.

September 2023

Tetsuya Shimizu
President & CEO,
Representative Executive Director

DAIDO STEEL GROUP INTEGRATED REPORT 2023

10

Daido Steel’s Value Creation Story

Daido Steel’s Value
Creation Story

Introduction

107-Year History of Daido Steel

Innovation to Realize a
Green Society● Japan’s high economic growth1920▶ Mergers and reorganization● Postwar reconstruction

1930

1940

1950

Global financial crisis (Lehman Brothers bankruptcy) ●● Two oil crises

1960● Plaza Accord

1970

1980

● Post-COVID-19

Great Eastern Japan Earthquake ●

1990

2000

● Decarbonized society

2010

2020

1976 Merger between Daido Steel, Japan Special Steel, and Tokushu Seiko to form a new Daido Steel

1922 Daido Electric Steel Manufacturing was established (merger between Electric Steel Manufacturing Co., Ltd. and Daido Steel)

1916
Electric Steel Manufacturing Co., Ltd.
was established

Corporate Data

On August 19, 1916, founder Momosuke Fukuzawa concentrated on the steel manufacturing industry and established Electric
Steel Manufacturing Co., Ltd. with the aim of utilizing electricity from the Kiso River water system.
After several mergers and reorganizations, the Company became Daido Steel Co., Ltd. in 1976, and continues to operate to thisday.
Over the past 107 years, we have overcome the changes of the times with the support of our stakeholders.
We will continue to work together with everyone to contribute to the development of Japan’s industry as a leading company inthe specialty steel business, enrich people’s lives, and contribute to society.

● Two world wars

1910

Contribution to Realizing a
Green Society

1938 Trade name changed to Daido Steel1937 Kanto Electric Refining was established1938 Trade name changed to Kanto Seiko

1964 Merger with Daido SteelFY2022
Net sales ¥578.6 billion

Net sales
Non-consolidated sales from FY1950 to FY1981
Consolidated sales from FY1982 onwards
Not shown because there is no data before FY1949

1915 Japan Special Steel was established1929 Tokushu Seiko was established▶ Domestic production sites Progress in the establishment of major manufacturing centers
Atsuta Plant

1916 Atsuta Plant began operations

1950 Closure

Pre-WWII Hoshizaki Plant

Hoshizaki Plant
Shibukawa Plant

Presidents of the three companies at
the merger signing ceremony

Hoshizaki Plant damaged by
Typhoon Vera (Isewan Typhoon)

1937 Hoshizaki Plant began operations
1964 Merger with Daido Steel,1937 Kanto Electric Refining
becomes Shibukawa Plant
was established
Takiharu Techno Center
1946 Takakura Plant began operations

2002 Moved and renamed to Takiharu Techno Center

Chita Plant 1962 Chita Plant began operations
Kawasaki Techno Center 1966 Kawasaki Plant began operations

One of the Company’s precious
assets: a 1.5ton L-type arc furnace

Chita Plant at the time ofcompletion2012 Renamed Kawasaki Techno Center
Metal Powder Plant

1985 Metal Powder Plant began operations▶ Major equipment’s first year of operation
Chita
Plant

Steelmaking Arc furnace

1962 Four furnace system

UHP 150t furnace, 70t furnace, etc.

Continuous caster (CC)1987 Installation of furnace F
1980 #1CC#1 Curved type two strand[1995 Hoshizaki Plant steel production suspended
and divided between two steel production hubs in
Chita and Shibukawa]

1991 #2CC#2 Fully vertical four strand

2016 VSR

Vacuum electroslag remelting furnace (VSR) Consumable electrode type 15t furnace
Rolling Large blooming rolling mill
Small rolling mill/wire rod rolling mill

Shibukawa Steelmaking Arc furnace
Plant

Double reversal type (finishing row HV continuous four stands)

1962 Blooming rolling mill

HV continuous type/finishing row high speed block mill

1963 Small-sized rolling mill

25t furnace, etc.

Vacuum induction melting furnace (VIM)

25t, 9t, 6t, 3t furnaces

Vacuum arc remelting furnace (VAR)

Consumable electrode type 10t furnace, etc.

Electroslag remelting furnace (ESR)

Consumable electrode type 15t furnace, etc.

#1CC

1969
Wire rod rolling mill1937 Arc furnace installation (steelmaking plant construction)

1986
Establishment of small-sized
rolling mill TEKISUN system

1993
Wire pickling line

1971 Two 15t arc furnaces

1981 10t arc furnace

1980 10tVAR

1984 6tVAR

1971 2tESR

1988 10tESR

Hoshizaki
Plant

7000t, 3500t, 2600t, NFP

Rolling Large blooming rolling mill

Double reversible finishing row HV stand

Wire rod rolling millSemi-continuous type (finishing row, block mill)

Small and medium-sized rolling mills, etc.

Semi-continuous type (HV shiftable, finishing row)

Second processing Steel bar processing
Wire processing
Titanium Melting furnace

2018 VSR2

1997 Blooming in-line press operation
1994 Establishment of wire rod rolling mill TEKISUN system

1999 3t/9tVIM
1970 6tVAR

2006 6tVIM

2016 25tVIM

1991 7tVAR2015 9tVAR

1991 7tESR

2015 15tESR

2019
9tVAR (two units)

2023
9tVAR

1993 VSR

Vacuum electroslag remelting furnace (VSR) Consumable electrode type 15t, 6t furnace
Forging Press

150t furnace
2013
150t furnace installed (furnace A shut down)

1971 2600t press
1940 Large rolling mill

1977 3500t press

1987 NFP

2021–2023
Strengthening of steel bar processing
equipment at Chita Second Plant
Steel bar solution heat treatment furnace
Steel bar cutting machine1953 Large rolling mill replaced
1947 Wire rod rolling mill

7000t press

1976 Wire rod rolling block mill1938 Small and medium-sized rolling mills

2011
Concentrated small-size rolling
operations at Kawasaki Plant

2000 Established a tool steel flat bar e-Quality system
1970 Continuous steel bar annealing furnace

Various processing, heat treatment furnace

1960 Continuous wire annealing furnace

Various processing, heat treatment furnace

2008 7000t press

1968 Continuous SUS wire annealing furnace

1989 Steel bar solution
heat treatment furnace

1999 SUS continuous pickling line

1982 Plasma arc stacked solidification and melting furnace

Special melting furnace

2012 Steel bar cutting processing relocatedfrom Kawasaki Plant
2015 WBD1

2019 WBD2

2006 Titanium levitation melting furnace▶ Overseas offices Progress in expansion into major overseas offices (establishment of local subsidiaries)
1965 Established sales office in North America

North America: Four companies including trading companies, die forging products manufacturing, etc.

1988 Established a tool steel processing and sales company in Taiwan

Taiwan: One tool steel processing/sales company

1994 Established a tool steel processing and sales company in Indonesia

Indonesia: Four companies including trading companies, tool steel processing/sales, etc.

1997 Established a sales office in Thailand (Bangkok)

Thailand: Seven companies including trading companies, die forging product manufacturing, magnetic material parts manufacturing/sales, etc.

2000 Established a sales office in China (Shanghai)

China: 11 companies including trading companies, tool steel processing/sales, magnetic material parts manufacturing/sales, etc.

1910
▶ Corporate
philosophy
and DNA

1920

1940

1950

1960

1970

1980

1990

2000

2010

The founding mindset of Momosuke Fukuzawa (1916)
When founder Momosuke Fukuzawa became president of Nagoya Dento Co., Ltd., he established the “GOKAI JUSSOKU (Ten Guiding Tenets)” for employees.

Establishment of management philosophy
and conduct guidelines (1991)

Using the 100th anniversary as an opportunity, we updated our management philosophy,
conduct guidelines, and created a group logo/slogan (2016)

1. The happiness we enjoy is thanks to the patronage of many customers
2. We must never forget the support from our customers even for a moment
3. The consumer’s opinions are always right and should be treated hospitably
4. Absolutely prevent breakdowns and satisfy customers
5. Time and effort are precious and should be used with the greatest efficiency
6. Work that needs to be done that day should not be postponed until tomorrow● Management Philosophy
We will continue to make use of our people, advance our technology,
and challenge the unknown in our effort to become a creative andinnovative corporate group that contributes to 21st-century society.

● Daido Steel Group Management Philosophy
Pursuing the potential of materials to support our future● Conduct Guidelines
Become the nail that sticks out● Daido Steel Group Logo and Slogan
DAIDO STEEL GROUP Beyond the Special

Founder Momosuke Fukuzawa

11

1930

DAIDO STEEL GROUP INTEGRATED REPORT 2023

7. Even the smallest things should not be overlooked.
Even little things must not be lost
8. Debate and formality are trivial matters. Think about how to make a profit
9. Complaining and laziness are bad for your health. Do your job happily
10. This company succeeds or fails depends on whether we can unite as one.
Let’s work together

2020● Conduct Guidelines
Aim High/Sincere Action/Personal Growth/Team Strengths/Open to Challenges

100th anniversary ceremony

DAIDO STEEL GROUP INTEGRATED REPORT 2023

12

Daido Steel’s Value Creation Story

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Overview of Daido Steel Group
Daido Steel Group’s overseas expansion destinations are displayed in orange.

Germany

China

South Korea

United States
TaiwanIndia

Hong Kong
Thailand

MexicoVietnamPhilippines

Malaysia
Specialty Steel

Trading and Service

Singapore
Indonesia

14

22

Engineering

3
Engineering

Trading and Service

19.0 billion

23.9 billion¥¥

The segment’s activities include thedesign and manufacture of, and related
after-sales services for, melting andrefining equipment, vacuum carburizing
furnaces, heat treatment furnaces for autoparts, environmental equipment, andmachine tools.

The segment conducts sales of products made byGroup companies, employee benefits services,
real estate and insurance services, golf course
management, analytics, and sales of software toexternal customers.

Net sales bysegment
Parts for Automobile andIndustrial Equipment

101.2 billion¥

The segment manufactures die forgedparts such as crankshafts using specialty
steel, precision cast parts for use inturbochargers, as well as engine valves,
jet engine shafts, and parts for power
plants’ gas turbines.

13

DAIDO STEEL GROUP INTEGRATED REPORT 2023¥

578.6 billion(Consolidated FY2022)

Specialty Steel

214.8 billion¥

The segment produces and sells structural steel,tool steel and others, mainly for use inautomobiles and production machinery.

Europe2 companies

1 company

12 employees

132 employees

Number ofGroup companies
by segment*

Number ofGroup companies
and headcountby region**

North
America

71 companies

Parts for
Automobile
and Industrial
Equipment

Central and South America

16

10,752

4 companies

HighPerformance
Materials andMagnetic
Materials(As of March 31, 2023)

164 employees

16(As of March 31, 2023)

Asia

Domestic

31 companies

33 companies

2,596 employees* Consolidated subsidiaries/affiliates

7,848 employees** Number of employees at consolidated subsidiaries and affiliates excluding
Daido Steel

Progress in net sales by region and overseas net sales ratio(Billions of yen)Domestic

North America

Asia

Other

Overseas net sales ratio

800

28％
25％

25％

23％
600

High-Performance Materials
and Magnetic Materials

219.7 billion

17％
400

364.9

¥

The segment manufactures and sells
high-performance materials and magnetic
materials used chiefly in automobiles, computers,
mobile phones and consumer electronics.

54.6

5.6
15.4

86.6
390.8

2012

20.0

78.5

8.7
15.4

113.1
383.6

9.8

106.2

23.2

432.9

13.1
26.4

310.2

200

0

7.9

2017

2020

2021

2022

(FY)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

14

Daido Steel’s Value Creation Story

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Relationship of Daido Steel and Society
The Daido Steel Group supplies society with steel-related products for a wide range of fields, such as specialty steel,high-performance magnets, and industrial furnaces. While not often seen by the general public, these products areused in automobiles, aircraft, power generation as well as medical treatments, etc. We play a role in increasingsustainability in industrial fields that help to support people’s lives.

Daido Steel is striving to reduce weight,
enhance strength, enhance corrosion
resistance, and lengthen life-spans ofvarious products to contribute to the
reduction of CO2 emissions in the world.

STARPAS® permalloy foil
We offer ultra-thin permalloy foil (thickness
10μm or more) with excellent workability
and flexibility that is suitable for highfrequency magnetic shields and yokes.

Jet engine shaft alloy
High-strength shafts with excellent
durability help to reduce fuel consumption
and increase the power output of aircraft
jet engines, supporting safe air travel.

Stainless steel for ballpoint pen tips
The part that supports the ball at the tip ofthe ballpoint pen is made by carving highly
corrosion resistant stainless steel. By
imparting properties that make it extremely
easy to carve, it is possible to perform
complex machining with high precision,
resulting in clear lettering and long life.

Medical titanium
Titanium has excellent properties such as
being lightweight, non-magnetic, andbio-compatible. We provide materials that
respond to various needs in the advancing
medical field.

Vacuum carburizing furnace“SyncroTherm®”
Makes automobile components stronger
and more lightweight by heat treatment byvacuum carburizing techniques, achieves
small-lot production and ultimate ondemand, and supports smart factories.

15

Gear steel

Soft magnetic powder for reactors

Gear steel combines high strength withdurability to realize smaller, lighter
automobile transmissions, helping to
reduce environmental impacts such as
CO2 emissions.

Step-up reactors increase the voltage ofbatteries for hybrid vehicles. The iron core
is formed from soft magnetic powder
developed by Daido Steel, and can store
a large quantity of energy. It also reduces
energy loss and helps to reduce power
consumption of the battery.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Neodymium hot deformation
processed magnet MQ3These ring-shaped magnets combine highmagnetism with corrosion resistance,
helping to realize quiet, smooth movement
for industrial robots and contributing to theelectrification of automobiles.

Target material for blackening layer“STARMESH®-γ1”
We have developed a new target material
for metal mesh blackening layer for use inautomotive touch panels, folding touch
panels, 5G transparent antennas, 5Gtransparent noise shields, etc. This
material has low reflectivity, excellent
discoloration resistance and etchingproperties, and contributes society as an
IoT supporting technology.

Ultrafine stainless steel wire
Thinner*, stronger, high-precision steel
wire supports the advancement of a digitalsociety.
* We manufacture stainless steel wire that is 11
microns in thickness, much thinner than humanhair (approximately 50-100 microns).

Ship diesel engine valves
We develop and provide nickel alloy
valves with excellent high-temperature
corrosion resistance to assist stablenavigation as NOx and SOx emissions
rules for ships become more stringent.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

16

Daido Steel’s Value Creation Story

Daido Steel’s Value
Creation Story

Introduction

Value Creation Process
Pursue high-performance specialty steel and contribute to “realizing agreen society” in 2030
InputsBoost earning power

Assets¥ 773.9 billion

Shareholders’ equity¥ 331.1 billion

Manufactured¥ 24.3 billion

Capital investment

28

Production sites (In and outside Japan)

Intellectual

Outputs

ESG management promotion

Outcomes[FY2022 revenue]¥ 578.6 billion
Operating income

Specialty Steel・ Environment measures [E]Parts for Automobile
and Industrial
Equipment

Engineering¥ 47 billion

including reducing CO2 emissions

High-Performance
Materials andMagnetic
Materials

・ Contribute to society [S]based on respect for human rights
・ Strengthening corporate

Trading and Service

governance [G]¥ 6.3 billion

R&D expenses¥ 214.8 billion
High-Performance Materials
and Magnetic Materials

Research & Development sites*

2 locations

Joint development and research*

182 projects¥ 101.2 billion(2023 Medium-Term Management Plan)▶P.31

Resolvingmateriality

71 companies

NaturalEnergy usage*

20,650,000 GL

Industrial water*

22,670,000 m3

As of March 31, 2023 or
FY2022 results*: Non-consolidatedCore competence

Trading and Service¥ 23.9 billion

Co-creation
capabilities

Social and RelationshipGroup (In and outside Japan)● Promotion of energy transition● Promotion of energy-saving● Expand effective utilization of natural resources¥ 19 billion▶P.30

12,422

Employees

Through supply of high-performance products:

Engineering

Implementation of management strategy

Human● Reduce CO2 emissions by 50% (compared to FY2013)● Contribute to realization of circular economy

Specialty Steel¥ 219.7 billion

64 cases

Pursue high-performance
specialty steel and contribute to“realizing a green society”
in 2030
Through business activities:

Net sales by segment

Parts for Automobile andIndustrial Equipment

Number of patents granted

Corporate Data

Net salesA

Ranking (R&I)

Contribution to Realizing a
Green Society

Since the founding in 1916, the Company has, along with the customer, continued to conduct manufacturing that contributes toinnovation that society needs. Through manufacturing that maximizes the diverse management resources held by the Company, we aim
to improve corporate value while progressing with ESG management that realizes a sustainable society. Daido Steel will continue to be acompany that generates “value that goes beyond the special” under the banner of the slogan “Beyond the Special” to exceed stakeholder
expectations.

Business Activities

Financial

Innovation to Realize a
Green Society

Financial (+)

Human (+)

Strengthen financial
foundation byreforming P/F

Improving sustainability
awareness such as
strengthening respectfor human rights[FY2022 emissions]
CO2 emissions*

824,000 tons-CO

Manufactured (±)

Social and
Relationship (+)

Optimize manufacturing
process and sites

Strengthen supply chain
management

Intellectual (+)

Natural (-)

Promote development of
products that contributeto environment

Reduce CO2 emissions by
reducing energy

2

▶P.19

Development
capabilities

Waste water*(including rain water)

Manufacturing
capabilities
Technologicalcapabilities

23,960,000 m3
Industrial waste*

75,000 tons
By-product recycling*

294,000 tons
Management
Philosophy

Pursuing the potential of materials

to support our future
Further increase corporate value

17

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Pursuing the potential of materials to support our future

DAIDO STEEL GROUP INTEGRATED REPORT 2023

18

Daido Steel’s Value Creation Story

Daido Steel’s core competency creates“value that goes beyond the special”
Daido Steel has the following three core competencies that it has cultivated over its 107-year history.
--“Co-creation capabilities to listen to customers’ needs and take on new challenges”--“Diverse high-performance materials and related development capabilities”--“Manufacturing/technological capabilities to realize highly reliable products”
We will continue to take on the challenge of creating new value while solving social and customer issues by making
full use of the strengths we have cultivated through the implementation of our five conduct guidelines.

Diverse high-performance materials and related

development capabilities
R&D personnel

R&D expenses(as of the end of March 2023)(FY2022)

300

¥

6.3

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Co-creation capabilities
to listen to customers’ needs and take on new challenges

Contribution to Realizing a
Green Society

Joint developmentwith customers

Joint research with third parties(as of the end of March 2023)

137

Corporate Data(as of the end of March 2023)

45

projects

projects● Specialty steel, functional products, fabricated materials:
We have long maintained deep relationships with customers in the automotive, heavy electrical, industrial machinery,
and aviation industries, and have worked on many themes related to improving heat and corrosion resistance andincreasing efficiency. In recent years, we have been actively working on the co-creation of advanced materials(machine, electronic, semiconductor, hydrogen, etc.) to realize a green society.
● Machinery:
We are actively promoting joint development with national and public organizations on many themes, such as our“Super-High Temperature Carbonization Technology Demonstration Project” which was selected as part of the
Breakthrough by Dynamic Approach in Sewage High Technology Project (B-DASH Project).
Initiatives to maintain and improve “co-creation capabilities”● Realizing “co-creation” through development in collaboration with customers● Launch of Next-Generation Product Development Center to promote carbon
neutrality with customers (functional products)● Machinery Division that turns ideas born from customer feedback into reality
Close internal and external collaboration

billion● R&D is split between the materials realm, which is comprised of specialty
steel*1 and magnetic materials, and the production process realm. In theexisting business area, we are developing materials such as specialty steel
and superalloys, which are our core realms of business technologies. We
are promoting material development that integrates component design andmanufacturing process technology.
● In recent years, we have strengthened our development system formagnetic materials and functional products with a view to the electrificationof automobiles and the development of information and communications.
We are also focusing on commercializing new products such as
hot-working processed neodymium magnets used in motors in electricvehicles and soft magnetic powder used in boost reactors.

Joint development scheme overview

DAIDO STEEL
Customer
Government office/public organization consortium

Technical Service division
Sales division• Joint project• Level-based exchanges andmeetings• Personnel interaction(guest engineers, etc.)

Manufacturing
division

Collaboration
R&D department

External research
institutions

Collaboration
Group companies Cooperating companies*1: Steel for high-strength gears for automobiles, electromagnetic stainless steel for automobiles, clean
stainless steel for semiconductor manufacturing equipment, maraging steel for aircraft shafts, titanium
alloy for consumer medical use, nickel alloy for drilling, etc.

Initiatives to maintain and improve “development capabilities”● Anticipating the needs of future society and expanding basic technology● Introducing AI technology to further utilize accumulated material development
capabilities● Accelerating the development of new fields through partnerships with universities,
research institutes, and other companies
Promote new business development by acquiring new technology and patents
Progress of the number of patents granted(cases)Existing areas

New areas

80

Number of improvements in
self-management activities(material X shape type, FY2022)(number of improvement proposals, FY2022)

About

4,000

types

13,400cases per year

● Daido Steel manufactures a wide variety of specialty steels using proprietary equipment and technology*2 to provide
materials that precisely meet customer needs. We are able to achieve steady reproducibly because of the advanced
manufacturing capabilities we have accumulated over the years.

Initiatives to maintain and improve “manufacturing capabilities” and “technological capabilities”

40
20

19

Types of products handled*2: Large rotating electric furnace, composite refining, round section vertical continuous casting, chance-free & precision rolling, difficult-to-process wire rod rolling,combined process using free forging press and radial forging machine, etc.

60

0Manufacturing/technological capabilities

to realize highly reliable products

2018

2019

2020

2021

2022

DAIDO STEEL GROUP INTEGRATED REPORT 2023

(FY)

● Improving manufacturing technology through collaboration and analysis with the Process Technology
Research Department● The workplace encourages its own improvements (self-management and TPM activities), which are pushed
even further by Daido Monozukuri Kaikaku (DMK) efforts.
● Supporting manufacturing capabilities with high-quality manufacturing education (Daido Steel TechnicalTraining School)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

20

Daido Steel’s Value Creation Story

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

One Year at Daido SteelIn fiscal 2022, we added plant equipment and continued with new construction in order to “boost earning power,” andstrengthened our manufacturing system for high-quality steel, for which demand is expected to increase in the future. We also
promoted sales and volume production of new products that contribute to the IT area and CASE, and the practical use of our
products by applying hydrogen technology.
As part of “ESG management promotion,” we have created a system to promote ESG initiatives by establishing a
Sustainability Committee. We also participated in domestic and international initiatives, disclosed information (TCFD, CDP, 30by30
Alliance for Biodiversity), and established and published human rights policy.

Boost earning power

Special melting equipment added to Shibukawa
Plant

Independently developed a radiant tube hydrogenburner andsucceeded inhydrogen-natural
gas mixed andmono-fuelcombustion tests,
aiming forpractical use

Release of a die steel-based 3D
printer metal powder that iscompatible with large moldmanufacturing

Vanadium-free titanium alloy that
contributes to SDGs and is registeredwith the ASTM standards, the world’s
most prominent standards

Launch of new sputtering target for
blackening layer on the metal mesh intouch panels STARMESH®-γ1

Launch of Materials Open
Platform for Permanent
Magnet by National
Institute for Materials
Science (NIMS) and four
magnet manufacturers

2022 Apr.

May

New production line
for point source LEDs
for optical encoders
and photoelectric
sensors begins fulloperation

Jun.

Assisting specialty steel heat treatment users in
reducing CO2 emissions and saving energy.
Promoting the spread of new STC furnaces andretrofitting proposals for functions that reduce
environmental impact.

Two new pieces of specialized melting equipment
added to Chita Second Plant

Began sale of permalloy foilthat suppresses magnetic
noise at low frequencies

Soft magnetic
powder for reactors
adopted in the newPrius

A three-dimensional view of the
behavior of micro magnets inside
cutting-edge permanent magnet
materials

Jul.

Aug.

(Left) For the past model hybrid

Sep.

Oct.

Nov.

Dec.

2023 Jan.

Publication of sponsored research reports

Secondary processing hub in Thailand holds opening ceremony—Reinforcing the supply chain of high-performancematerials in ASEAN

Establishment of the
Sustainability Committee(Right) For the new model hybrid

Feb.

Mar.

Daido Steel Group Human Rights Policy establishedIssuance of transition bonds
Advisor Masato Sagawa
receives the IEEE Medalof Honor

Decided to select and concentrate on the die forging
products business and focus on improving
competitiveness of high-speed precision forging
products

Participates in the“30by30 Alliance for
Biodiversity”

Recognized as a “Certified
Aichi Biodiversity
Company”

Received Nissan Motor Co., Ltd.’s 2022
“Nissan Global Supplier Award—Innovation
Award”

Obtained “Kurumin”
certification (third time)

Recognized as a “CertifiedHealth & Productivity
Management Outstanding
Organization”(six consecutive years)

Information disclosure based on therecommendations of the Task Force on
Climate-related Financial Disclosures (TCFD)
Received a “B” rating on
the CDP questionnaire forwater security andclimate change.

ESG management promotion

21

DAIDO STEEL GROUP INTEGRATED REPORT 2023

The award ceremony was held in July 2023

Raising the retirement age to 65 years old

Announcement of Multi-stakeholder Policy

DAIDO STEEL GROUP INTEGRATED REPORT 2023

22

Daido Steel’s Value Creation Story

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Financial/Non-financial Highlights
Financial performance (Consolidated)
Net sales and operating income(Billions of yen)

CO2 emissions and emissions intensity

Profit attributable to owners of parent and ROE

Net sales (left scale)600

Non-financial performance (non-consolidated)

578.6

Operating income (right scale)(Billions of yen)60

47.0 50500
400(Billions of yen)(%)

Profit attributable to owners of parent (left scale)

40

15

36.4

ROE (right scale)

30

200

20

1,500

(Billions of yen)

Cumulative amount (left scale)60

Emission intensity (kg-CO2/t)

1,000

57.1

Yearly amount (right scale)

40

824

7.5

20

500

10
100

(Billions of yen)

(kt-CO₂/year)

By-product recycling rate
(%)

6

90

4

60

2

30

0

0

79.7

10.4

30

40

300

Amount of capital invested on energy-saving
facilities * Cumulative total from 1996

For details, see ▶ P.67

3
20

598

10

0

2018

2019

2020

2021

2022 (FY)

0

0

0

2018

2019

2020

2021

2022

Return on assets (ROA)

Return on sales (ROS)
(%)

(%)

9

9

8.1

0

0

(FY)

2018

2019

2020

2021

2018 2019 2020 2021 2022

(FY)

(FY)

Amount of capital invested in environmental
protection * Cumulative total from 1977

R&D expenses for environmental products(Billions of yen)

(Millions of yen)120

Cumulative amount (left scale)Yearly amount (right scale)(Billions of yen)

8

90

6

0

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

1.9 2

0

(FY)

Dividend(Billions of yen)

(yen)

40

300

(%)

40

Dividend payout ratio (right scale)

230

225

30

24.3

26.9
150

20

10

75

10

0

0

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

3,600

2,000

1,200

3,283

2,959

0

0

0

2018

2019

2020

2021

(FY)

2018

2022

2019

2020

2021

2022
(FY)

(FY)

Major quality accident index*

Ratio of lost-time work injuries* Index taking the actual results from 2006 as “1”
(%)

3

1.0

2.0

2.2

30

20

0

FemaleMale(Persons)

2,400

2018 2019 2020 2021 2022

Ratio of women in management
Dividend per share (left scale)

(FY)

4,000

(FY)

Capital investment (construction base)

2022

4

30

2018

2021

324

3

0

2020

6

60

3

2019

Number of employees

6,043

6,000

2018

102.6

6.4
6

2022

Daido Steel
Manufacturing industry average

1.5

1.25

2

0.5

1.0
1
0.5

0

0.30

0.1
0

0

2018

2019

2020

2021

2022
(FY)

2018

2019

2020

2021

2018

2022
(FY)

2019

2020

2021

2022
(FY)

* Details about environmental data are disclosed on our website.

https://www.daido.co.jp/common/pdf/pages/sustainability/data/eco_data.pdf
23

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

24

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Sustainability Management
Promotional base and priority themes for sustainability management

Using our unique DNA to maintainsustainability for the next 100 years
Representative Executive Director,
Executive Vice President

Over the past year, the Company has made a big turn of thewheel toward sustainability management. In April 2022, weestablished a Sustainability Committee chaired by the President,
and a full-time outside director who is an Audit & Supervisory
Committee member also serves as a committee member, anddiscussions include an outside perspective. Additionally, inJanuary 2023, we established the ESG Management
Department as the secretariat of the Sustainability Committee.
We have established a Sustainability Promotion Section and a
Global Environment Affair Section within the ESG Management
Department to strongly promote ESG management.

The Sustainability Committee originally had four meetings per
year planned, but after lengthy discussions about issues thatneeded to be fixed, there were ten meetings in fiscal 2022. The
content included not just a general discussion of sustainability
management but also more specific topics like “CO2 reduction
activities,” “water security,” “respect for human rights initiatives,”“integrated report and corporate governance report,” “anticorruption activities,” and “human capital management.” Amongthese, we have focused on three important themes: (1) climatechange, (2) human capital management, and (3) corporate
governance. The main content is explained below.

Tsukasa Nishimura

Three paths to carbon neutrality
First, regarding our initiatives to address climate change, in orderto reduce CO2 emissions, we first introduced the “Daido Carbon
Neutral Challenge 2030” in 2021. This initiative aims to cut CO2
emissions by 50% by 2030 compared to 2013, and our target is
to become carbon neutral by 2050. We held an ESG briefing
titled “Value to Green Society 2030” in December 2022 to inform
investors and the media on our initiatives to combat global
warming and to deepen their knowledge. In the future, we willreport not only on the environment but also on social andgovernance themes.
We have stated that we will support the following three carbon
neutral (CN) strategies as part of our efforts to address global
warming.
ESG briefing in December 2022

We live in a time when it is impossible to anticipate sustainable
development for companies with traditional profit-oriented
management. Sustainability management is crucial for companies
to continue to develop sustainably through value creation. The
Company has a long history and celebrated its 107th anniversary
in 2023. We must continue to exist for the next 100 years as abusiness that adapts to the era and contributes to society.
It is essential to continue to embrace the challenge of a new
era while appreciating the DNA from the past. Daido Steel’s roots
lie in an area of outstanding natural beauty, the Kiso River system.
Momosuke Fukuzawa, the Company’s founder, had developedhydroelectric power generation to supply the Chubu and Kansai
regions, but since nighttime electricity demand was lower thandaytime demand, he came up with an unconventional solution toeffectively utilize the surplus nighttime electricity and built Japan’s
first electric arc furnace steelmaking plant. The concepts of theeffective use of energy and ultimate recycling of electric arc
furnace steelmaking—a process that melts down surplus scrap
and produces new steel— are closely tied to modern times, and25

DAIDO STEEL GROUP INTEGRATED REPORT 2023

we have been pursuing them for over a century.
It is not an exaggeration to say that the Company’s history is ahistory of mergers since our founding in 1916. After repeatedmergers, the current Daido Steel was born in 1976 through themerger of Japan Special Steel, Tokushu Seiko, and Daido Steel,and has since developed into one of the world’s largest dedicatedspecialty steel manufacturers. Because of our history of mergers,
we have diversity, which is the ability to accept different cultures.
Additionally, we have been able to preserve our independence
because we don’t have a parent company, an atypicalmanagement style for a specialty steel manufacturer. Diversity andindependence are a part of our founding mindset, which we haveappreciated even in the face of challenging environmental
changes and could be said to be two of our strengths. Diversity
and independence are in alignment with the corporate governancestandards that are being imposed on companies, and they also
reflect our unique mindset, which will be crucial as we work
toward sustainability management in the future.

CN process

Promote reduction of CO2 by integrating energy-saving technologies into own manufacturing processes

CN products

Developing various innovative products that support mobility innovation and contributing to the realization of a green society

CN solutions

Support customers in reducing CO2 emissions with products that incorporate innovative energy-saving technology based on a
combination of engineering design and in-house operational know-how
For specific initiatives regarding the three themes in the table above, please see “Initiatives to Address Climate Change” on P.67–70.

In addition, as part of our participation in environmental
initiatives, we endorsed the TCFD in November 2021, understood
the risks and opportunities that climate change brings to theCompany, and their impacts, evaluated the resilience of Daido
Steel’s medium- to long-term strategy and the need for further
measures. After formulating specific measures, we disclosed theinformation in 2022. In addition, we took part in the Ministry of theEnvironment’s “30by30 Alliance for Biodiversity” in September
2022, and endorsed the basic concept of the Ministry of
Economy, Trade and Industry’s “GX League” in March 2022, andannounced our participation in April 2023. Also, we participated in
the Hydrogen Utilization Study Group in Chubu as part of a project
to build a supply chain to realize a hydrogen society.

Blast furnace manufacturers have begun offering green steel,which has lately gained attention as a CO2-free steel material,
utilizing the mass balance approach; however, for electric furnacesteel, the official definition of CO2 reduction level has not yet beenclarified. In order to sell green steel, it is essential to fullycomprehend the CO2 emissions per ton of each product andcalculate the amount of CO2 reduced based on certification froma third-party organization. We are actively working towardobtaining this certification. After receiving certification, we will keep
promoting the usage of electric furnace steel, which produces
less CO2, and renewable electricity, as well as our green steel
brand.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

26

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Sustainability Management

Human capital management that creates job satisfaction
The following five Conduct Guidelines for human resources whowill realize our management philosophy as part of our initiative inhuman capital management.
● Aim High● Sincere Action● Personal Growth● Team Strengths● Open to Challenges
We offer a variety of human resource development options
based on these guidelines, including personnel who will be incharge of future management, professional personnel, andproduction site operators. Additionally, it’s crucial to capitalize on
diversity and give women, foreign employees, and mid-career
employees the chance to participate actively and advance theircareers in order to make up for the staffing shortage brought onby a potential decrease in the working population. We launcheda diversity promotion project in 2014 within the Personnel
Department to encourage the creativity of diverse humanresources. We are working to create a good environment inwhich we aim to double the number of female managers fromthe present 15 to 30 by 2030, and further increase the numberof foreign managers and mid-career managers from the present
2 to 68, respectively.

On the other hand, compared to before, there are now more
retirees at our company, mostly from the younger generation. It
takes ten years to acquire the knowledge and skills necessary to
produce specialty steel products, so retiring with only a few yearsof experience would be a big loss for the Company. Work must
be made more comfortable and conducive to productivity inorder to halt this. To make work more comfortable and conducive
to productivity, it is important to increase employee engagement
and realize well-being, which entails having them understand andempathize with the Company’s goals as well as enhancing
individual rights and working conditions to maintain a healthy
state of mind and body.
Specifically, to earn our employees’ understanding andempathy, we need to explain our company’s management
philosophy, conduct guidelines, medium- to long-term strategies,
and direction to them in a more easily understandable manner.
The next step is for each employee to consider the purpose of
their position and align their own objectives with those of theCompany. We are making work easier by raising the rate at
which men take childcare leave, raising the total number ofannual leave days taken by all employees, and enhancing theworking environment for women, all of which are urgent issues
related to the empowerment of women. In our opinion, it’s
important to create job satisfaction. With the aim of “achieving
more autonomous self-growth and finding attractive jobs,” we arebuilding a specific system that will enable working women to play
an even more active role.

To strengthen governanceRegarding corporate governance initiatives, our company
transitioned to a company with an Audit & Supervisory Committee
in June 2022 with the purpose of strengthening the governancesystem. Along with this transition, we have delegated a part of
the resolutions of the Board of Directors to the President tospeed up decision-making and focus the content deliberation in

27

DAIDO STEEL GROUP INTEGRATED REPORT 2023

the Board of Directors, and have increased the ratio of outside
directors on the Board of Directors to over one-third. Additionally,
we have established a Nominating and Renumeration Committee,
which serves as an advisory organ to the Board of Directors, withfour of the six directors being outside directors, to enhancetransparency and fairness.
Regarding the development status of the internal control
system, the Corporate Risk Management Department (CRM
Department) continuously monitors and audits the internal control
system of the whole Daido Steel Group and promptly reports tomanagement with the findings. Additionally, a CRM Committeethat holds regular meetings has been established as a decisionmaking body for the creation and implementation of internal
controls in accordance with risk management, the Companies
Act, and the Financial Instruments and Exchange Act. The
chairman of this Committee is the President, and the Committee
meets twice every six months, and whenever necessary. In fiscal
2022, the Committee met a total of eight times, and submitted
matters to the Board of Directors as necessary. Additionally, theGroup CRM study session aims to lower risks with domestic andinternational Group companies by exchanging information on risk
management.

The corporate governance code was revised in June 2021,
further increasing demands for the transparency andeffectiveness of corporate governance. Regarding the parentsubsidiary listing issue, the Company has two listed subsidiaries:
Nippon Seisen Co., Ltd., a stainless steel wire manufacturer, and
FUJI OOZX Inc., an automotive valve manufacturer. The reasonsfor the listing of both companies are to expand business
transactions based on name recognition and trustworthiness,advantage in capital procurement, and securing excellent humanresources. By combining the benefits of listing with Groupsynergies, it greatly contributes to maximizing the corporate valueof the entire Daido Steel Group. Additionally, both companies arestrengthening their governance systems and working to secure
the interests of general minority shareholders. We are aware that
there are concerns about the purpose of the parent-subsidiarylisting from the perspective of protecting the interests of investors
and other minority shareholders and we will continue to consider
medium- to long-term options while taking changes in thebusiness environment into account.
Regarding cross-shareholdings, every year, Daido Steelreviews the purpose and appropriateness of individual crossshareholdings in the Board of Directors. Many of the crossshareholdings we hold are stocks of companies that are ourcustomers, and we have continued to hold stocks that we thinkwould significantly increase product sales while reducing thenumber of stocks we think will only slightly increase sales. In the
future, as outlined in our Medium-Term Management Plan, we
will reduce the amount of cross-shareholdings, including deemedshareholdings, to 20% or less of net assets by March 2024, andaim to reduce it to around 10% in the future. In addition, we plan
to use the proceeds from the sale for carbon neutral investments
and strategic investments, but will also consider shareholder
returns.

What is sustainability management?
At the Company, sustainability management entails putting a lotof effort into risk management to reduce harm to corporate value
and making the most of opportunities, which are the opposite ofrisk and may be used to improve corporate value and generate
profits.
It is natural for a company to return profits to shareholders inline with profits, and our company has also increased its dividend
payout ratio. At the same time, it is very important for us tomaintain profitability while adapting to the rapidly changing
corporate environment. To realize our goal for 2030, we must
continue making proactive strategic investments and reform theprofit structure of existing businesses. Retain-and-Reinvestment
is the foundation of corporate growth, and we will strive toimprove corporate value by firmly fulfilling our management
responsibilities and accountability.

The complexity of sustainability challenges is rising, making
them challenging to handle from an internal perspective alone.
We take part in multiple sustainability initiatives because we aim
to expand our knowledge in specific areas and collaborate withothers to quickly improve the Company’s sustainability
management. In July 2023, we signed the United Nations Global
Compact. This is because of the fact that addressing “humanrights,” “labor,” “environment,” and“anti-corruption” in a global setting isnecessary if we want to continue
growing our overseas business. We
will keep proactively taking part ininitiatives and working towardsustainability management.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

28

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Sustainability Basic Policy and Materiality
Sustainability basic policy

Materiality

Since being established in 1916, Daido Steel has responded tothe demands of society with manufacturing based on specialty
steel, and has contributed to its development. As the world faces
an era of great change, our goal is to be a corporate group thatwill continue to be recognized and sought after by future society,and we aim for a 2030 vision to “Pursue high-performance
specialty steel and contribute to ‘realization of a green society.’”
The Company prioritizes preservation of the global environment
through climate change measures and the supply of highperformance products as material issues, and we will work tocontribute to sustainability through manufacturing. As a
responsible company, we will also put into practice our
responsibilities and contributions to society, such as respect forhuman rights, strengthening our human capital, and coexistencewith local communities. We will actively pursue further initiatives
to strengthen governance as the foundation for putting materiality
into practice. Our management philosophy of “pursuing thepotential of materials to support our future” has been instilled inthese approaches to sustainability and is put into practice every
day as our corporate activities.

The materiality formulated in fiscal 2020 is reviewed every year.
After re-evaluating “risks and opportunities” from amanagement and a stakeholder perspective, we have newly
identified respect for human rights, supply chain management,
and strengthening governance as additional material issues from
1. Preservation of the global environment(business activities)
2. Preservation of the global environment(product supply)

SDGs initiatives
Sustainable Development Goals (SDGs) were adopted by the United Nations in
September 2015 as a common language for achieving a desired vision of the world byresolving social issues under the slogan “Leave No One behind.”
The Company will provide specialty steel to support a more prosperous future society
through manufacturing that leverages the technological capabilities it has cultivatedhitherto based on its management philosophy, its product development capabilities, andits capacity for innovation, and will work to bring about the world aimed for in the SDGs.

3. Responsibilities and contributions to society

Organization of promoting sustainability
In addition to establishing a CSR Committee chaired by the
President in fiscal 2007, and strengthening CSR activities to fulfill
its corporate social responsibilities, the Company has addresseda variety of issues.
In recent years, it has become even more important for
management to achieve both a sustainable society by solvingsocial issues and the sustainable enhancement of corporate
value. Based on this trend, in April 2022 the Company
established a Sustainability Committee as an advisory body to
the Board of Directors.
We also established the ESG Management Department as a
specialized department responsible for rolling out various

company-wide measures.
The Sustainability Committee conducts planning and draftingof proposals and provides opinions with regard to basic
management policies, as well as promotional activities andstrategies related to sustainability. Important matters are decided
after being reported to or put on the agenda of the Board of
Directors. The Committee met ten times in fiscal 2022.
The Company has positioned sustainability at the core ofmanagement, and will take a forceful approach to promoting thevarious measures related to materiality, centered on addressing
climate change.

Initiatives to address climate change▶P.67-70

Transition to a circular economy▶P.71-72

Technological innovation for energy transition▶P.73

Improvements in energy efficiency▶P.74

Effective utilization of natural resources▶P.74

Respect for human rights▶P.75-76

Elimination of occupational accidents▶P.77-78

Promotion of health and productivity management▶P.79-80

Promotion of diversity▶P.81-83

Work style reforms▶P.84

Social contribution initiatives▶P.85-86

Supply chain management▶P.87-88

Strengthening of corporate governance▶P.93-98

Risk management and compliance▶P.101-106

Stable supply of high-quality products▶P.107-108

Stakeholder communication*▶P.109-110* Reviewed in fiscal 2022

Process of identifying material issues[1] Identification of social issues
	Identify 95 social issues by comparing the SDG targets to the global risks in the Global Risk Report 2019,
excluding duplicated issues, and add issues attracting a high level of social concern[2] Evaluation from business perspective	Evaluate the importance of the social issues in terms of risks and opportunities for the business of the Company,
from short-term, medium-term, and long-term standpoints

Manage/supervise

Board of Directors
Transfer execution authority

Business execution
Submit/reportManagement
Meeting

Internal Audit
Division
Risk Management
Division

4. Strengthening governance2021 onward. At the same time, preservation of the global
environment has been reorganized by dividing it into thecategories of business activities and product supply. In fiscal
2022, stakeholder communication was added.
Materiality for fiscal 2023 is as follows.

Sustainability Committee
Executive Board
ExecuteAudit[3] Evaluation from stakeholder perspective

President & CEO

Each business division/plant

CRM Committee
ReportHead Office/branches/sales sites

ESG Management
Department<Company-wide committees>
12 committees including
the CO2 Reduction Promotion
Committee andthe Environment Committee

Group companies

	Evaluate the issues considered important by stakeholders in each area of business, and the relationship to theitems assessed by ESG evaluation institutions[4] Preparation and identification of materiality matrix
	Integrate business and stakeholder evaluations to prepare a materiality matrix. Materiality for Daido Steel is
identified after being discussed twice by the Sustainability Committee

CRM: Corporate Risk Management

29

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

30

Innovation to Realize a Green Society

2023 Medium-Term Management
Plan Progress

Corporate Data

Steel product sales volume (1,000 tons/year)

Medium- to Long-Term Outlook

1,400

Engineering● Expand energy-saving products toachieve carbon neutrality
Parts for Automobile and Industrial
Equipment● Capture increasing demand for freeforging products over the medium- tolong-term● Maintain products with high market
shares● Increase in orders due to the expansionof certification acquisition
High-Performance Materials andMagnetic Materials● Expansion of high-performancestainless steel including stainless steel
for semiconductor manufacturing
equipment● Increased demand for magnets inconjunction with the expansion of BEVs
and HEVs
Specialty Steel● Lower demand for steel for internal
combustion engines● Increased demand for steel used in
e-Axles● Reduce costs and secure appropriate
roll margins

1,253

1,200

1,200

1,129

1,219

1,000

1,085
978

800

(Billion yen/year) Operating income by segment
50
37.0
36.2
2.8
33.8
2.7
1.8 2.5
5.0
3.1
2.3
24.8
2.3
2.6
3.0
0.4 10.1
22.2
26.7
20.7
1.8
0.9
13.6

40
31.5
1.2
1.8
4.8

20
13.7

success with prior strategic investments, enhanced the upward
elasticity of production capacity, and supplied products in atimely manner in response to new demand. In conjunction with
this, we have also made efforts to correct sales prices in light ofthe soaring cost of energy and changes in foreign exchange
rates. To give one example, since we are in the electric furnacebusiness, which uses electric power to melt iron, we introduced
an energy surcharge scheme for customers with majortransactions in which the sales and delivery destinations are
already determined when the steel products are made. As aresult of these efforts, we were able to exceed the operating
income target under the medium-term management plan one
year early. I believe that we were able to implement pricecorrections because customers recognize that our products arehigh market value products with limited alternatives. In the future,
it is essential that we increase our competitiveness even further
and demonstrate our presence by shifting to high-performance
products and taking other actions.
In fiscal 2023, the final year of the medium-term management
plan, we will continue our efforts to achieve key KPI targets bycarrying out the fundamental policies set forth in the plan.

2023 Medium-Term Management Plan Awareness of the business environment and fundamental policies
Significant changes in the external environment

Effects on and responses by the Daido Steel Group● Acceleration of initiatives for achieving a green society
and tighter regulation of greenhouse gas emissions● R educing CO2 to achieve a green society is unavoidable

2030 Vision● R apid advancement of the electrification of mobility● C apture and expand demand for high-performance products in
response to decreasing demand for structural specialty steels

Pursue high-performance specialty
steel and contribute to “realizing agreen society”● Acceleration of the digitalization of lifestyles and work

● Appropriate responses to long-term growth in the semiconductor
manufacturing equipment market as a result of the spread of
fifth-generation mobile communication systems (5G)

● S oaring prices for energy and raw materials

price competitiveness and secure appropriate roll
● Reinforce
margins

DAIDO STEEL GROUP INTEGRATED REPORT 2023

1,146

1,104

Tatsushi Iwata

31

Contribution to Realizing a
Green Society

1,349
1,176

1,159 1,136

30● R ecruiting and developing human resources and raisingproductivity are crucial issues

1,311

1,259

Director, Managing Executive Officer●D ecline in working population in Japan due to a low birthrate
and aging population and rising importance of promoting active
participation by womenInnovation to Realize a
Green Society

Changes in Operating Income by Segment (Consolidated)

We have reformed our portfolio with a focus on growth
products while achieving operating income levels in excess
of our medium-term targets by taking action to secure
appropriate margins in response to rising costs.
Going forward, we will continue to stabilize managementfoundations while pursuing aggressive growth strategies
and closely monitoring environmental changes over the
medium to long term.

In June 2021, we launched the 2023 Medium-Term
Management Plan, a three-year plan with fiscal 2023 (ending
March 2024) as its final year. From a medium- to long-term
perspective, efforts to curb global warming are expected to gain
momentum on a worldwide scale, and progress is expected in
the transformation of social structures with the aim of reducing
CO2 emissions. Electrification is accelerating in the automobile
industry, and internal combustion engine vehicles are expected
to peak out in the 2020s. In conjunction with the shift from fossil
fuels to clean energy, hydrogen and other new energy sources
are attracting greater attention. In addition, the acceleration of thedigital revolution is expected to lead to sustained growth in thesemiconductor industry, which supports telecommunications andother aspects of digitalization.
We believe that it will be extremely important to increase ourearning power in order to achieve corporate growth in preparation
for these changes in the business environment. Accordingly, we
have made systematic and strategic investments and havereformed our business portfolio. (Refer to Changes in Operating
Income by Segment on the right page.) In the second year of thecurrent medium-term management plan, we have achieved

Daido Steel’s Value
Creation Story

Introduction

Fundamental policies

10
9.9
0

25.5
24.4
1.6
1.2
20.4
19.0
2.1 1.2
1.0
1.3
15.4
1.3
1.7
1.1 1.0
1.1
12.3
0.8 3.8
17.4
3.4
13.5
6.6
11.1
7.6
5.8
3.5
1.7 3.2

2. Strengthen management’ agility
3. Expand further overseas
business
4. Promote ESG management

6.0

5.1

-0.5

12.2
-2.1

3.8
-2.6

40.0
2.0
6.0

■ Trading and Service■ Engineering

1.0■ Parts for Automobile
and Industrial
Equipment

21.5

24.3

24.5

■ High-Performance
Materials andMagnetic Materials

9.8

13.5

2022

2023 Medium-Term
Plan Management Plan

6.5

■ Specialty Steel

-1.3

-10

2011

2012

2013

2014

2015

2016

2017

Large-scale investment in Shibukawa Plant(free forging products, superalloys, andhigh-performance stainless steels)● 25t VIM furnace (November 2016)● Two remelting VAR furnaces (July 2019)● One remelting VAR furnace (July 2023)

2018

2019

2020

2021

(FY)

150t furnace at Chita Plant(November 2013)

Hoshizaki Plant, Chita Second Plant(high-performance stainless steels, titanium products)● Cost reductions (structural steel)● Augmentation of wire rod secondary processing (heat treatment furnaces and other facilities)(August 2019)● Augmentation of processing capacity (October 2020, January 2021)● Expansion of heat treatment furnace (April 2021)● Augmentation of processing capacity (April 2023)● Two remelting VAR furnaces (scheduled for end of fiscal 2024)● One remelting VAR furnace for titanium (scheduled for end of fiscal 2024)

Chita Plant No. 2 CC streamlining(August 2019)● Cost reduction (bearings, stainlesssteels)Status of progress of key KPI
In response to these developments, we have secured thenecessary capital in line with the increase in operating capitalthrough interest-bearing debt. As a result, the D/E ratio is
expected to be 0.65 as of March 31, 2024 and will not reach thetarget of 0.5 set in the medium-term management plan.
We have set a target of achieving carbon neutrality by 2050.
Going forward, we will make strategic investments in growthareas, and we are aware that since substantial funds for capital
investment will be necessary to achieve carbon neutrality, weneed to make effective investments while ensuring thesoundness of the Company’s financial foundations.

Sales volumes have declined, particularly of specialty steels, but
we have reformed our portfolio by expanding high-profit products
such as free forging products and semiconductor manufacturing
equipment, and we have made efforts to secure appropriate
margins in response to rising energy costs. As a result, both
operating income and return on equity (ROE) exceeded the target
values under the medium-term management plan.
From a financial perspective, however, prices for raw materials
have increased substantially (compared to the assumptions of
the medium-term management plan), and operating capital has
increased, including an increase in inventory assets.

Fundamental Policies ofthe 2023 Medium-Term
Management Plan
1. Expand businesses in fastgrowing fields

6.5

47.0
47.0
2.5
3.3
1.0
1.4
8.5
8.2

2023 MediumTerm Management
Plan Targets

FY2021 Results

FY2022 Results

FY2023 Plan

Status of Progress

At least ¥40.0 billion¥37.0 billion¥47.0 billion¥47.0 billion

Level in excess of the FY2022 target value

Return on equity (ROE)

8.0%

8.5%

10.4%

8.4%

Maintain at least 8% starting in the first year

D/E ratio

Target value not reached due to increase in interest-bearing debt

Operating income

0.5

0.69

0.64

0.65

Investment; three-year
cumulative approval basis¥85.0 billion--¥90.0 billion

Encourage strategic investment in growth areas

Sales volume of steel
products (non-consolidated)

1,200,000 tons

1,253,000 tons

1,085,000 tons

1,129,000 tons

Medium-term management plan value not achieved due todecline in automobile-related demand

DAIDO STEEL GROUP INTEGRATED REPORT 2023

32

Innovation to Realize a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

2023 Medium-Term Management Plan Progress

Progress of the 2023 Medium-Term Management Plan (four basic policies)
1 Expand businesses in fast-growing fields
Conduct R&D to achieve carbon neutrality
We are introducing test equipment that can perform material
evaluations tailored to new use environments so that we candevelop new materials in fields expected to undergo substantial
growth in conjunction with revolutionary changes in mobility,
energy, and other areas.
CASE & semiconductors(electrification, advancement of ICT)
e-Axles

MotorsGrowth areas

Semiconductorrelated products

CASE & semiconductors

Carbon Neutrality 2050
Clean energy
HydrogenAmmonia

Bio-mass

Clean energy(diversification of fuels)

Progress: Good
Large-scale strategic investment in growth areas
With the aim of reforming our portfolio even further, we aremaking active capital investments in future growth areas such as
high-performance steels, superalloys, and titanium products.
Capital investment ▶P.41
In addition, the precision casting business also generates low
profits, so we have reduced acceptance of orders for turbo
housing products and liquidated a Chinese subsidiary engaged
in the turbo parts processing business. In conjunction with the
reduction of orders, we will consolidate plants in Japan, and wewill investigate using the plant sites as auxiliary manufacturing
plants for magnets, orders for which are expected to increase in
the future. In the future, we will assess business in a timely
manner and concentrate management resources.

Concentration of management resources
Applications

Materials to develop andexpand sales

Testing equipment

e-Axle gear reducers

Gear steel

High peripheral speed testing
equipment: Operational in 2022

Tool steel business
Die forging business

MotorsMagnets andsoft magnetic materials

Motor testing equipment:
Under operation

Precision casting
business (turbo)

Semiconductor manufacturing
equipment

Stainless steels, superalloys

Gas erosion testing equipment:Implemented in 2023

Trading and service
business

Hydrogen/ammonia-related
manufacturing

Stainless steels, superalloys

Hydrogen embrittlement
testing equipment
Implemented in 2022

Stainless steels, superalloys

Corrosion testing equipment:
Under operation

Bio-mass-related
manufacturing

2 Strengthen management’ agilityProduction allocation
In parallel with reformation of our portfolio by expanding
businesses in fast-growing fields, on the production side, we are
implementing various measures that will contribute to lowering
the break-even point including consolidation of production
among plants, raising productivity, and improving yields, and weare increasing production efficiency and reducing costs.
The Company’s main production sites are the Chita Plant,
Hoshizaki Plant, and Shibukawa Plant. Under the 2023 MediumTerm Management Plan, we are working to maximize production
efficiency through specialization of the functions of each plant.
The Chita Plant has higher production efficiency and lower costs
than the other plants, and consequently, we are shifting
production of high-volume stainless steels from the Hoshizaki
Plant to the Chita Plant. With this shift, the Hoshizaki Plant will

Selection and consolidation of businessWe are scrutinizing low-profit businesses and concentrating
management resources to strengthen management’ agility.
The 2023 Medium-Term Management Plan calls for rebuilding
the die forging business, and we have decided to withdraw fromdie forging products and housing products, which havegenerated low profits for many years. Going forward, the die
forging business will specialize in high-speed, high-precision
forged products.

Progress: Excellent
specialize in difficult-to-process materials. In addition, we
introduced two vacuum arc remelting (VAR) furnaces for highperformance stainless steels at the Chita Second Plant so that
the Shibukawa Plant can specialize as a superalloy melting
mother plant with a focus on the manufacture of free forging
products such as aircraft parts. This will make it possible tosupply base materials from a plant close to the Hoshizaki Plant,
which is the shipment plant for high-performance stainless steels,
leading to shorter lead times and a decrease in inventory assets.
The specialization of functions is not something that can becompleted in just a few years, and we believe that it will be an
ongoing process that extends into the next medium-term
management plan and the one after that as well. In addition, we
will make full use of the Chita Second Plant to actively develop andcommercialize products in new growth areas.

Consolidation of production at the Chita Plant● Consolidate production to the Chita Plant, which has high productivity and high yields due to progress in the development of melting and rolling

technologies, thereby reducing CO2

Assessment of business● Established a tool steel plant in Vietnam (May 2023)● Withdraw from the mold business in Mexico (May 2021)● Seek to expand business in India● Focus on high-speed, high-precision forged products● Acquisition of mold business in the U.S. (March 2023)●W ithdrawal from die forging products and housing products (phased withdrawal

starting in March 2023)

 eduction of orders accepted for turbo housing products (March 2020) and●R
liquidation of subsidiary in China (October 2020)● Plant consolidation in conjunction with the reduction of orders● Acquisition of trading business in China from TimkenSteel (July 2021)●S uspension of operations of Kisokomakogen Uyama Country Club andKisokomakogen Kanko Hotel (December 2020)

3 Expand further overseas businessReinforcement of overseas supply chain
The Daido Steel Group comprises 71 companies, of which 38
are overseas consolidated subsidiaries, and of those, 28 arelocated in Asia (10 in China, 16 in ASEAN, and two in India).
Under the 2023 Medium-Term Management Plan, we seek toincrease overseas sales of high-performance stainless steels,
superalloys, and tool steels, with a focus on these Asia markets.
To expand our overseas business, we are implementing a

Progress: Improvement needed
strategy of reinforcing supply chains according to the businessenvironment and conditions of these markets in each region. Dueto travel restrictions imposed in response to the COVID-19
pandemic and other factors, however, various measures havenot progressed as quickly as anticipated. We recognize that the
progress of specific measures in the Indian market, where growthis particularly expected, is an urgent issue.

China evelopment of foundations that will lead to higher sales of Special Bar Quality (SBQ) products as well as increased sales capabilities for superalloys and specialty steels in China●D
centered on Daido Steel Materials Technology Shanghai Co., Ltd., a subsidiary acquired from U.S.-based TimkenSteel in August 2021

ASEAN

● E stablished new bar and wire secondary processing site (production started in January 2022)
In Thailand, we established Daido Shimomura Steel Manufacturing (Thailand), reinforcing local supply chains for high-performance materials including stainless steels

India● In the Indian market, where growth is expected, we are investigating the possibility of expanding our collaboration with Sunflag Iron and Steel Co. Ltd. and seek to expand the scale ofthe tool steel business

UnitedStates● Acquired plant facilities for the hot forging mold manufacturing business and established Lexington Technologies Company in March 2023. By generating synergies with Ohio Star Forge,
our manufacturing base in North America, we seek to increase profits and strengthen the competitiveness of parts for the automobile and energy businesses in North American markets

4 Progress of ESG managementTo further implement ESG management with the aim ofenhancing sustainable corporate value, the CSR Committee wasrenamed the Sustainability Committee and its functions were
further developed in April 2022. The ESG Management

Progress: Good
Department was established in January 2023, and we arereinforcing various measures to protect the global environment(E), fulfill our responsibilities and contribute to society (S), andreinforce governance (G) onsolidated production of 2,500 t/month in melting processes and 1,500 t/month in rolling processes and will consolidate production further at●C

the Chita Plant

Chita Second Plant

Chita Plant
Mass production plant that pursues high productivity
Forging ⇒ Rolling process
500 t/month(Stainless steel, tool steel)

Wire rod rolling process
1,000 t/month(Stainless steel)Forging ⇒ Rolling process
100 t/month(Stainless steel)Bar and wire plant specializing in difficult-to-process
products

Melting processes
2,500 t/month(Tool steel, stainless steel)

Shibukawa Plant
Specialization as a superalloy melting mother plant
Specialization in free forging products such as aircraft parts

33

Note: Site acquired in December 2018 (236,000 m²)
Expand businesses in fast-growing fields and leverage integrated processes
in the Nagoya district

DAIDO STEEL GROUP INTEGRATED REPORT 2023

E

1 Preservation of the global
environment(business activities)● Promote reduction in CO2 emissions

2 Preservation of the global
environment(product supply)● Supply of products in response to innovations in mobility: Magnets and soft magnetic materials (powders and steel strips)

S

3 Responsibilities andcontributions to society

G

4 Strengthening governance

Hoshizaki Plant(Target: Reduce by 50% by 2023 and achieve carbon neutrality by 2050)
Participation in the GX League (April 2023)●D evelopment of technologies that contribute to the effective utilization of natural resources: Ultra-high-temperature carbonizing

furnace● Respect for human rights ➡ Publication of Daido Steel Group Human Rights Policy (February 2023)● Promotion of human capital management● Measures to address biodiversity and contributions to local communities● Stakeholder communication ➡ Emphasis on dialogue with investors and shareholders, reinforcement of IR and SR activities● Transitioned to a company with an Audit & Supervisory Committee (June 2022)● Introduction of the stock compensation plan for directors (June 2023)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

34

Innovation to Realize a Green Society

Daido Steel’s Value
Creation Story

Introduction

R&D and Intellectual Property
Strategies
With innovation through close internaland external collaboration, Daido Steelis able to generate products that impart
special functions that exceed
expectations and support thefoundations of societyManaging Executive Officer

Ikuo Sugie

Medium-term• Monitoring the orientation and market trends of customers’ product development while collaborating with business divisions in the same manner as
for short-term themes• Reporting new developments in key elemental technology according to their importance and budget scale, and supervision by research executives
to management

Long-term• Steadily transferring the technical skills for our various core technologies (alloy designing, materials analysis, process improvement, simulation
analysis) to the next generation• Setting a vision and targets, because there may be great unknown potential in tackling themes that are conscious of new products in macro future
growth markets. For themes that seem likely to thrive, moving up to the next phase in marketing, in collaboration with business divisions, so that it
can be proposed as a new product• Providing stimulation based on discussions of cutting-edge technology focused on academic activities and enhancing the ability to invent andcreate by studying published research results

Investment in R&D resources is shifting every year to projects
aimed at “realizing a green society.” Below are the trends in R&D
expenses for existing areas and new areas, but the ratio ofdevelopment expenses in new areas, such as realizing a green
society, is also increasing.

Trends in R&D expenses for existing and new areas

3.1

R&D policy

Management
Management of R&D
The Corporate Research & Development Center that is the coreof R&D in the overall Daido Steel Group has slightly over 300
personnel and is generating organic synergies by collaboratingclosely with internal business divisions, Group companies, andexternal research institutions.
The Corporate Research & Development Center decides on
resources invested until business formation based on the typeand importance of technology development themes. For

example, we will maximize investment of internal development
resources to realize important development themes that have asignificant impact on the management of the Company.
However, for explorative themes taken on with a medium-tolong-term perspective, we are proactively utilizing external
partners and balancing overall resources, such as investing
internal resources flexibly while looking closely at feasibility.
According to the timeline, the differences in management will
be as follows.

Corporate Data

• Responding to customers’ development schedule with a sense of urgency• Managing progress through close communication not only within the Corporate Research & Development Center alone but also with businessdivisions (sales division and manufacturing division)● Existing areas

3.5

performance that are not just an extension of what we’ve been
doing until now.
To Daido Steel, we believe that innovation means plunging
without hesitation into unfamiliar areas where we have few
results, raising our antennae to pick up expected future needs,
and contributing to the realization of a more abundant andsustainable society. However, the new market that we will
challenge should not be an enclave that is completely unrelated
to us, even though it is a growing market sector, but rather an
area where we can take advantage of the core technologies andintellectual property we have built up over the years.

Contribution to Realizing a
Green Society

Short-term● New areas

Up to now, Daido Steel has established numerous alloy
designing and manufacturing technologies that achieve
compatibility between maximum extraction of the performance ofspecialty steel and practical manufacturing costs. However, thematerials newly required by CASE, the shift to electric vehicles, ahydrogen society, and so on due to the transformation to acarbon-neutral society means that we must broaden our horizons
to include not only the insights accumulated with existing steel
materials alone, but also combinations with industries andmaterials, such as electricity and chemicals, with which we havebarely interacted before. We also need new value andInnovation to Realize a
Green Society

3.1

2.5

2.6

2017

2018

3.0

3.9

4.1

2.9

2.4

2.8
2.3

2019

(Billion yen/year)

2020

2.5

2.4

2021

2022

2023

Meanwhile, in May 2022 we also carried out corporate
restructuring for overall streamlining, setting up the new Process
Technology Research Section that integrates the melting andcasting technology and process molding laboratories, shutting
down the Solution Support Section, and reassigning the humanresources.
Management of intellectual property
We are actively filing applications for advanced technologies
acquired as a result of R&D. We are further deepening
collaborations with business divisions, and, in conformity with our
product sales expansion strategy, we are aware of theestablishment of patent rights and the differentiation from ourcompetitors’ technologies. We strive to contribute to profits
through appropriate management of patents.
Because R&D is an activity that gives rise to the added valueof new ideas, it is closely tied to intellectual property. In the firststage of drawing up an R&D theme, we confirm novelty from apatent-filing perspective, including in the sense of checking thenecessity of proceeding, and whether it is in competition with anexisting patent. Furthermore, every six months we nominate inadvance the projects that will be candidates for patent filing andmanage them so that we can steadily move forward withapplications and the establishment of rights along with theprogress of the research themes.

Old and new organizational chart of the Corporate Research & Development Center● Previous research system● Current research system

Corporate Research & Development Center

Corporate Research & Development Center

Special steel research
No.1 Automotive Steel Research Sect.
No.2 Automotive Steel Research Sect.
Corrosion/Heat-Resistant Alloys Research Sect.
Tool Materials & Technology Research Sect.
Fusion Forming Process Research Sect.

Special steel research
Automotive Steel Research Sect.
Corrosion/Heat-Resistant Alloys Research Sect.
Tool Materials & Technology Research Sect.
Fusion Forming Process Research Sect.

Magnetic materials research
Hard Magnetic Materials Research Sect.
Soft Magnetic Materials Research Sect.
Functional Materials Research Sect.
Process research
Melting & Solidification Process Research Sect.
Forming Process Research Sect.
Metal Powder Technology Research Sect.
Instrumentation and Control Sect.
Planning & administration
Planning Sect.
Administration Sect.
Solution Support Sect.

Magnetic materials research
Nakatsugawa Advanced Magnetic Materials Development Center
Permanent Magnetic Materials Development Sect.
Magnetic Material Applications Research Sect.
Hard Magnetic Materials Research Sect.
Soft Magnetic Materials Research Sect.
Functional Materials Research Sect.
Process research
Process Technology Research Sect.
Metal Powder Technology Research Sect.
Instrumentation and Control Sect.
Planning & administration
Planning Sect.
Administration Sect.
Nakatsugawa Administration Sect.

(in the Nakatsugawa Advanced Magnetic Materials Development Center)

35

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

36

Innovation to Realize a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

R&D and Intellectual Property Strategies

Initiatives on priority issues
The initiatives on the three priority issues are described below.

1. Technological trends and portfolio transformation
to realize a green society
In order to address the change to a carbon-neutral society, we
have adopted a strategy of shifting to electric vehicles (motors,
batteries, inverters, gears, etc.), developing new materials usedin the materials that contribute to a hydrogen society, improving
the performance of existing materials, and distributing resources(personnel and budget) to develop manufacturing processes that
support these based on prioritization. The following are specificexamples, and about 80% of total resources will be invested.
● Motors: Hot worked magnets, PLP magnets, development ofmotor performance evaluation technology● Batteries: Anode materials for lithium-ion batteries● Inverters: Materials related to semiconductor manufacturing
equipment (CLEANSTAR, etc.), development of super clean
steel manufacturing technology● Gears: High-strength gears for e-Axle (structural steel)● Hydrogen: Materials with hydrogen embrittlement resistance,development of new evaluation technology

3. Training of development personnel

2. Co-creation with external parties
In the past, the Company held firm to the doctrine of selfsufficiency. However, as we deepen relationships with customers
in industries where we have not previously had any businessdealings, we have increasingly sensed the danger in our inability
to respond promptly to global trends with only existing platforms.
As such, we have formed proactive partnerships with external
parties, including universities, research institutions, and othercompanies, and are accelerating efforts to acquire newtechnology through open innovation.
Co-creation with external parties has had an enormous effectand has been useful in helping us to quickly understand areasthat are unfamiliar to us (chemicals, electricity) at an early stage
and in speeding up R&D. Meanwhile, it also contributes toincreasingly sophisticated levels of material and processdevelopment by enabling us to approach even our own existing
technology (metallic materials) with an even higher degree of
specialization. This creates a system that meets market
expectations for the development of ever-more advanced
materials and products. Partnerships with external parties, suchas the establishment of endowed university courses and joint
research with overseas technology research institutions, havegrown to a current total of 45 (11 more than the previous year).

Changesin the results of domestic and international exchanges
(Persons)(R&D personnel)
FY 2018
2019
2020
2021
2022
Study at Japanese university

0

2

0

2

3

Overseas study

2

0

0

2

0

Guest engineers

1

1

1

1

1

❷ Collaboration with universities and external institutions
We are working to turn staff with almost no knowledge of motors
into experts capable of designing cutting-edge motors bydispatching them to the Motor Research Center in Daido
University, which has been established as an endowed university
course. We are also continuously developing human resourcesin fields beyond motors that are expected to grow in the future,such as magnetic materials. Below is an example from theprevious fiscal year.

raw material for the reactor part in Toyota Motor
Corporation’s Prius, which was launched in 2009, theCompany has striven to provide a stable supply of thismaterial for 13 years and contributed to the reduction of
CO2 emissions.
For the past model hybrid

https://www.daido.co.jp/about/release/2023/230208_reactor.html (Japanese only)

For the new model hybrid

In May 2022, Daido Steel, TDK Corporation, Shin-Etsu
Chemical Co., Ltd., and Hitachi Metals, Ltd. launched theMaterials Open Platform for Permanent Magnet (Magnet
MOP), centered around the National Institute for Materials
Science (NIMS).
With Magnet MOP, we seek to contribute to the realizationof carbon neutrality by improving performance and reducing
rare elements in the motors that are expected to be widelyused in electric vehicles. For this reason, we are developing
tools that will enable us to rapidly develop materials with the

DAIDO STEEL GROUP INTEGRATED REPORT 2023

required properties for each application. For material design
and process optimization in tool development, we apply
world-class microstructural analysis technology and datadriven research on magnet materials. Furthermore, in order
to involve not only NIMS researchers but also university
personnel, we are also promoting personnel exchanges with
universities that use the cross-appointment system.
Daido Steel will dispatch six employees to the Magnet
MOP and will train the personnel responsible for magnet
development, which is expected to grow.

https://www.daido.co.jp/about/release/2022/0530_nims.html (Japanese only)

Toward the creation of new value and performance
Society is currently in the midst of a transformation. Especiallyduring such a time, we also need new value and performance.
We view this as an opportunity, and as we take on challenges infields with which we have had no contact up to now, we will

37

❸ AI education
All staff at the Corporate Research & Development Center arelearning about AI because we consider the utilization of AI to benecessary for future R&D activities. There are individual
differences between personnel who just learned foundational
knowledge and those who are data scientists, but materials andprocess researchers must be trained to at least reach the level ofbeing able to utilize AI. Further, in order to raise materials
development staff as data scientists, we will aim to raiseknowledge about AI by various methods, including sending staff
to university doctorate courses.

Participation in the Materials Open Platform for Permanent Magnet by the National Institute for Materials Science(NIMS) and four magnet manufacturers

Soft magnetic powder for reactors used in the latest hybrid systems
In February 2023, the part (reactor) that increases thevoltage of batteries for hybrid automobiles, which we jointly
developed with the Toyota Motor Corporation, Toyota
Central R&D Labs., Inc., DENSO Corporation, and Fine
Sinter Co., Ltd., was adopted in the latest hybrid systems.
The soft magnetic powder that has been used here is amaterial designed by the Toyota Motor Corporation andToyota Central R&D Labs. By applying our own atomization
technology and powder processing technology andincorporating the proprietary technology we have developed,
this powder has been put to practical use. By achieving thetargeted characteristics of the materials and performance ofthe part, we were able to reduce the size of the reactor part,which helped to reduce its cost.
Since Daido Steel’s soft magnetic powder was used as a

❶ Utilization of international exchange system
We hope we will expand our perspective using the international
exchange system in Japan and overseas to develop a mindset
that looks beyond the Company. In addition, we will develop thehuman resources needed to change the Company, including
considering exchange systems with venture companies to give
employees new experiences in different cultures.

support the foundations of society by increasing the speed of
R&D while enjoying close internal and external collaborations,and generating materials with special value and special
performance.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

38

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Manufacturing Technology Strategy
Manufacturing capabilities that utilize the equipment
capacity and manufacturing know-how cultivated over ourlong history
Daido Steel is a comprehensive specialty steel manufacturer thathas manufacturing equipment capable of consistently
manufacturing most of the specialty materials used around theworld, including carbon steel, case hardening steel, high-strength
steel, bearing steel, free-cutting steel, stainless steel, tool steel,and superalloys. Leveraging our strengths, such as the
manufacturing know-how to produce many models
simultaneously on one line, the mechanisms that meticulously
reflect our customers’ needs through manufacturing that is
consistent company-wide, and our short delivery times, wemanufacture about 4,000 types of specialty steel products every
year.
The know-how to manufacture diverse specialty steels to meetthe needs of our customers is an asset we have fostered throughco-creation and coordination with customers and research
institutes over many years. We are able to create these 4,000
types of products because our long relationships with ourcustomers allow us to fully understand their applications, and wehave accumulated a collection of “recipes” based on theirpreferences. This detailed manufacturing expertise and the
manufacturing capabilities that reliably implement it are the resultof many years of improvements in our manufacturing processes,
and they are an advantage that distinguishes us from thespecialty steel companies emerging overseas.
At the same time, the fact that operators receive one year of
training (Daido Steel Technical Training School) before being
placed at a worksite and that we have a mechanism for
cultivating high-quality operators, and our corporate culture inwhich operators themselves propose improvements every day
and JK ( jisshu kanri, or self-management activities by small
groups) and TPM (Total Productive Maintenance) actively function
as the basic activities in implementing these improvements, are

Based on high manufacturing
capabilities that support manufacturing,
we will accelerate portfolio reform andthe development of carbon-freetechnology and respond to the diverse
needs of our customers.
Director, Managing Executive Officer

Tadayuki Kashima

The strength of Daido Steel’s manufacturing technology
A history of developing proprietary manufacturing
equipment with special features
Manufacturing technology is technology related to the equipment
for manufacturing products and technology related to the knowhow and processes of how to proceed in the process whenusing that equipment.
As a leading specialty steel company that predicts the needsof the times, Daido Steel has pioneered the development andintroduction of advanced manufacturing equipment. For example,
in the 1980s we developed our proprietary ELVAC® process (aconsistent process of electric arc furnace, ladle refining, vacuum
degassing, and continuous casting) in order to support the
full-scale volume production of specialty steel for automobiles,
and we have contributed to the motorization of Japan by
maintaining a steady supply of high-quality specialty steel. In the
1990s, we developed and introduced the vertical, round crosssection continuous caster, which was unmatched by any othercompany, achieving the continuous casting of ball-bearing steel
and heat-resistant steel.
In addition, with equipment such as the stainless steel vacuum
refining furnace (VCR) and the electric arc furnace with rotating
drive (STARQ®), we have collaborated with our Machinery
Division and used our proprietary equipment to achieve volume
production of products with special features, reduce costs, andreduce CO2 emissions. Daido Steel’s great strength is the factthat this equipment and these processes have allowed worldleading manufacturing with our own hands.

39

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Vertical, round cross-section
continuous caster

Electric arc furnaces with rotating drives(STARQ®)

Comparison of STARQ® energy emissions factors

the source of our competitiveness in the manufacturing process.
There are a total of 4,000 operators, including those atcooperating companies. Workplaces are made up of teams of
about five people, and each team conducts self-management
activities. There are various themes for these activities, from daily
work efficiency to CO2 emissions reductions. Monthly
presentation meetings are held at each plant, and result
presentation conferences attended by the whole company,
including the President, are held twice a year. At these
conferences, attendees’ motivation is increased through awards;
and these events continue even when performance is poor.
The Company has also been promoting DMK (Daido
Monozukuri Kaikaku) activities since 2004. We have establishedthe Advanced Manufacturing Department as a specialized
department and, in conjunction with basic JK and TPM activities,
we are working on the resolution of important issues, led by theworksites, in order to drastically improve productivity. For
example, we have set up model workplaces and are engaging in
activities to increase productivity by 30% and to foster leaders.

105th JK presentation conference (June 2023)“Continuing to change,advancing our technology,
moving into new areas”
Expanding awareness of the
manufacturing mindset to all
employees(Past set to 100)

100
85

The Seven Teachings of
DMK Activities
1 A place with no needs will not
2
3
4

DMK activities poster for FY2023

5
Past electric arc furnace (80t)Electric arc furnaces
with rotating drives (150t)

DMK activities poster for FY2023

67

improve
Changing the perspective whenlooking at data reveals issues
Set your targets high and challenge
them determinedly
Rough and ready is better thanslow and perfect
Stick to the Three Reality Principle(go to the actual place, see theactual product, understandthe actual situation)
Be obsessive about eliminating all
waste
Be responsible for results and keep
checking until the end

DAIDO STEEL GROUP INTEGRATED REPORT 2023

40

Innovation to Realize a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Manufacturing Technology Strategy

2023 Medium-Term Management Plan progress
Capital investment for transforming the product portfolio
With the shift to electric vehicles, as we foresee a decline in thevolume of orders for specialty steel used in engines andtransmissions, which have been our mainstay products until now,
we must make a timely transformation of our portfolio to productareas where orders are expected to grow in the future, such as

Example (2) of CO2 emissions reductions at the plant

semiconductors, aircraft, excavators, and the medical field. In the2023 Medium-Term Management Plan, because we can expect
fields such as high-performance stainless steel, superalloys, andtitanium alloys to grow, we are enhancing measures to enhance
the production capacity of the processes causing bottlenecks inthese fields. Here are some examples.

We are improving yield by increasing the unit weight (1 ton to 2 tons) of Hoshizaki Plant secondary wire processing (WB: wire
peeler process).

2t slab2t slab × 1

Defect removal loss
reduced 7%

Discard loss reduced by half

Defect grinding
allowance

2t coil × 1
Discard●S
 trengthening heat treatment and secondary processing (PM: steel bar cutting processing) equipment in order to improve the manufacturing capacity forhigh-performance stainless steel (Chita Second Plant)● Strengthening vacuum arc remelting (VAR) furnaces in order to improve the manufacturing capacity for high-performance stainless and superalloy (Shibukawa
Plant, Chita Second Plant)● Strengthening manufacturing capacity and competitiveness of superalloy steel: installation of raw material pretreatment equipment (Chita Second Plant),
strengthening manufacturing capacity for superalloy rolled steel rods (Hoshizaki Plant)● Strengthening manufacturing capacity of titanium: installation of remelting equipment for titanium (Chita Second Plant)
Changing steel bar processing (PM) capacity(2015 set to 100)

Changing vacuum arc remelting (VAR) furnace capacity
166(2022 set to 100)

Hoshizaki Plant secondary wire processing (WB) 2-ton processing rate
(Chita Plant rolled products)(Chita Plant rolled products)

Heating

Rolling

(%)

2025

(FY)

Discard48

1t slab100

1t coil × 2

DiscardDefect grinding
allowance

56

31

Discard
Discard

51

21
Discard1t slab × 2

0
2013

2015

2017

2019

2021

2022

Improved yield due to increase to 2 tons

130

141
110

115
100

Recognition of issues and medium- to long-term key measures

100

2015

2017

2021

2023 (Year)

2022

2023

Vacuum arc remelting (VAR)
furnaces at Shibukawa Plant

Steel bar processing (PM) line at Chita Second Plant

Realization of a green society (reducing CO2 emissions)
In Daido Steel’s manufacturing, the reduction of direct CO2
emissions (Scope 1) is a major issue, and we must makecontinuous and systematic progress. In the 2023 Medium-Term

2025 (Year)

Management Plan, we are working from the perspective ofimproving the efficiency of burners typified by heating furnaces
and soaking furnaces, and raising yield by increasing the unit
weight of the processes downstream from rolling.

Example (1) of CO2 emissions reductions at the plant

Strengthen manufacturing capital and human capital while
improving product portfolio
Customers’ needs change with changes in society, and we needa decision-making process that looks far ahead to how our
product portfolio will change as a result and to changing ourmanufacturing technology in our portfolio accordingly. Forprocesses that cover the medium- to long-term, we must makedeterminations and decisions when the outlook is difficult to see.
In this situation, we can anticipate a healthy level of orders forsuperalloys and titanium alloys going forward, and we will
determine the timing of investments and accurately invest in
strengthening capacity so that we don’t miss opportunities to getthose orders. In addition, most of these markets are overseas.
Superalloys in particular are attracting attention in Asian markets.
In order to enter and expand our share in the markets, it isessential that we expand our personnel who are familiar with themarkets, compliant with global standards and with the quality
control systems required by our main overseas customers, andwho can promote the acquisition of our customers’ certifications.
For this reason, we will actively move forward with personnel
exchanges among plants.

We are improving the LNG emissions factor by installing the oxygen-enriched combustion burners of the Chita Plant soaking
furnaces. By increasing the oxygen supply, the amount of LNG required is reduced.
Comparison of soaking furnace LNG emissions factors (Past set to 100)

Air

100

83

(oxygen concentration 21%)

(oxygen concentration 40%)Further enhancement of productivity through DX
We are currently selecting model workplaces and proceedingwith the visualization of production sites, centered on the
Advanced Manufacturing Department. First, we visualize theworksite, digitally gathering the signal information generated by
the equipment, such as equipment operations, efficiency, andinformation about breakdowns and quality. Next, using datavisualized by the worksite itself, we aim to eliminate operational
waste, standardize maximum efficiency, and so on. At present,
these activities have begun at some model workplaces, but wewill be working on DMK activities to establish these worksite-led
methods of production optimization as part of the Daido SteelGroup’s corporate culture.

Contributing to the diverse needs of future society
Daido Steel has generated trusted manufacturing supported byreliable manufacturing capabilities and numerous industrystandard technologies through co-creation with our customers.
Even as society attempts great changes in recent years, we

Air + pure oxygen

Realization of a green society (reducing CO2 emissions)
In Daido Steel’s manufacturing process, we are developing andinvestigating the ultimate carbon-free electric arc furnace as ameasure to drastically improve the electric arc furnace melting
process, which has the greatest amount of CO2 emissions. In
cooperation with our Machinery Division, we are pursuingcarbon-neutral manufacturing processes using the electric arc
furnace with rotating drive and technology to preheat scrap withexhaust gas, which have already been developed.

are resolutely continuing our efforts to maintain and improve thehigh manufacturing capabilities that are our strength, responding
to the diverse needs of future society, and working to expand ourentry into areas of growth.

LNG
Illustration of oxygen-enriched combustion burners of soaking furnaces

41

DAIDO STEEL GROUP INTEGRATED REPORT 2023

(Past)Air + LNG combustion soaking furnace(After improvement)
Air, pure oxygen +LNG combustion soaking furnace

DAIDO STEEL GROUP INTEGRATED REPORT 2023

42

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Innovation to Realize a Green Society

Introduction

Human Resources Strategy

Overview of human resources and organizational management initiatives

Contribution to Realizing a
Green Society

Corporate Data

Human resources and organizational management

To maintain and improve our humancapital, we will promote theestablishment of initiatives andenvironments to “make the most of
our people”

Human resources development initiatives continuously implemented
until nowDeveloping expert human resources● E arly-stage development system“Daido Steel Technical Training School”● Ongoing development activities“DMK activities”
Developing staff human resources●S pecial training and education“Selective training for core human resources responsible formanagement”“Global human resources development (exchanges, etc.)”

Recently ongoing establishment of the “Making the Most of Our
People” initiative and environment
The “Making the Most of Our People” initiative● E xtension of the retirement age(raising the retirement age from 60 to 65)●D iversification of recruitment(from a single cohort to year-round recruitment)●D iversification of human resources(encouragement of active roles for women, recruitment of foreign nationals)
Establishing the environment● Promotion of work style reforms● Promotion of health and productivity management● Update employee dormitory facilities

Human resources development initiatives
Managing Executive Officer

Takaaki Taketsuru

The human resources Daido Steel needs
Daido Steel has established the five conduct guidelines for thehuman resources who will realize our management philosophy.
With the launch of the Project to Establish the Daido Steel GroupManagement Philosophy and Conduct Guidelines within the
Company as we approached our 100th anniversary in 2016, thefive conduct guidelines were devised in a review of the previous
guidelines to align them with the current era. For example, one of
the conduct guidelines is “Open to Challenges,” and in the

Company’s tolerance for challenges, the culture is one of “trying
without fear of failure.” I believe this is our advantage. It puts intowords and concisely summarizes the personnel behavioral
patterns that have created this advantage, and I think this is whatsustainable human capital looks like to us. In addition, even intimes of rapid change, I believe that, to realize a green society,the needs required of the materials and an attitude that pursues
potential will continue to be our advantage.

Daido Steel’s five conduct guidelines
Aim High：Anticipate the new era and have a pioneering mindset
As a professional, work on your own mission to the very end

Sincere Action：Put yourself in the other party’s position and accept eachother’s diverse values and presence
Respond to stakeholder expectations

Personal Growth ：Always keep growth in mind when working

Developing people through expert courses
The source of Daido Steel’s continued ability to steadily produce
high-quality materials is the highly-skilled and highly reliable humancapital at our manufacturing sites. For our new recruits, we maintainthe Daido Steel Technical Training School, a training facility establishedin 1952. Recruits spend approximately one year at the school. During
this time, not only do they learn the basic knowledge and technology
they will need as experts in specialty steel manufacturing, but we also
support them as they learn to live independently as working adults andcompany members. We say that manufacturing is developing people,
and we believe that this policy of valuing the development of people,
which dates back more than 80 years to the days of the school’s
predecessor, the “Technician Training School,” continues to this day.
Turning to the development of people at our manufacturing sites,
our DMK (Daido Monozukuri Kaikaku) activities are also essential.
Before these activities began in 2004, we had found capital
investment difficult due the economic slump, but orders rapidly
increased after that and we promptly needed to increase productivity.
Our factory capabilities were tested as we wondered how best to
increase productivity by 30%. With the idea of rejecting the statusquo, a specialized unit supported our activities, shared wisdom, andinvested management resources in a timely manner, enabling theCompany to exert all its capacity and increase productivity. We felt
the true potential of the Company’s factory capabilities, and these
activities, which produced big results through an accumulation ofsmall improvements, have continued for over 20 years, becoming thebasic activities of Daido Steel’s manufacturing.
Developing people through staff courses
In the management departments and the sales, R&D, andmanufacturing technology departments, we have set the specificbehavioral patterns expected at each grade of occupational ability,
bearing in mind the development of human resources who can put thefive conduct guidelines into practice, and are conducting educationand training based on structures we have created. We havesummarized this content as the skills development guidebook, anddisseminated the content as human resources development targets,
and we are using it as employee evaluation standards.
In addition to education according to the grades of occupational
ability, we have assembled education and training systems that
support the growth and challenges of each employee, including theoverseas trainee and international exchange system for global
human resource development, the encouragement of the acquisitionof various qualifications, and the selective training to develop thecore human resources who will be responsible for management in
the future.
The overseas trainee and international exchange system has beenin place for decades and covers a wide range of goals, from foreign
language studies to the acquisition of specialized knowledge andbusiness skills in different cultures. Employees who have returned
from exchanges have said that the experience brought them avariety of good operational results.
There are various selective education options which, in addition tolearning about the ideas and differences of other people throughdiscussions with members gathered from various other companies
and business departments, are also enormously useful for building
personal connections with people both inside and outside theCompany.
In recent years, collaboration with diverse other industries andglobalized responses have become essential, and we recognize that
focusing on the new possibilities for Daido Steel that will accompany
external environmental change and increasing the number of
personnel who are able to act autonomously will be a challenge inthe future. We will work to support improving skills through reskillingin order to solve issues.
Education for employees ▶P.83

Be willing to accumulate experience and improve yourself

Team Strengths：Gather the wisdom of the Group beyond the organization
Get things done with cooperation and a sense of urgency

Open to Challenges ：Pioneer a new era with an open mind
Face difficulties without fear of failure

Practical training of students at Daido Steel Technical Training School

43

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Internal selective training

DAIDO STEEL GROUP INTEGRATED REPORT 2023

44

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Human Resources Strategy

The “Making the Most of Our People” initiative
One of the conduct guidelines, [Sincere Action], incorporates themeaning “accept each other’s diverse values and presence” andexpresses Daido Steel’s diversity initiatives and attitude. As it
becomes increasingly difficult to secure personnel due to theimpact of the declining birthrate and aging population, it isessential to establish a workplace environment in which people
respect and acknowledge each other’s differences, regardless ofgender, nationality, values, sexual orientation, or disability. We
launched a diversity promotion project in 2014, and since 2018
we have been promoting activities centered around the Diversity
Section in the Personnel Department.

Encouragement of active roles for women
The issues in Daido Steel’s diversity promotion action plan arethat there are few women in management and few opportunities
for career support and career development that take into accountlife events, and a corporate culture that promotes diversity has
not been cultivated enough. To resolve these issues, we have
set the following targets and are implementing a variety ofmeasures.
Diversity ▶P.81–83

Illustration of completed employee dormitory (Motohamaryo)

Diversity promotion action plan
[Plan Period]

April 1, 2021 to March 31, 2026 (5 years)[Targets]	● Increase the percentage of next-generation lead supervisor positions
responsible for management held by women to 17%. (12%→17%)● Increase the retention rate of female employees hired 9 to 11 business years
ago to 80%. (33.3%→80%)● Conduct initiatives to support the career development of women.
● Sustain and promote the creation of a culture that accepts and makes themost of diversity.
We have also set the target number of women in managerial positions in 2030 to 30 (15 in 2022).
Furthermore, in the future, we believe it will become important
to enhance our “Making the Most of Our People” activities evenmore than before in order to address various changes in thebusiness environment. We will promote and investigate diversity
initiatives from a variety of perspectives, including theencouragement of active roles for women.
Change of the retirement age to 65
With the shrinking labor force and in light of perspectives such as
maintaining and improving factory capabilities, in 2023 wechanged the retirement age system from 60 to 65. In this way,
employees will fully demonstrate the skills and knowledge they
have cultivated, and those skills will be securely passed down.

Diverse hiring methods
Nowadays the mobility of human resources has increased. At
Daido Steel, we have reexamined the restricted policy ofrecruiting new employees as a single cohort, which we and othercompanies have used until now, and we are consideringswitching to a policy of year-round recruitment that includes
mid-career employees. This will enable us to secure thepersonnel required for the Company’s operations in the future,and to acquire different types of professional personnel, who will
be immediately work-ready, demanded by our business strategy.
In addition, hiring foreign nationals with diverse backgrounds
and values will lead to invigoration of the Company. In recent
years, we have also worked together with university career
centers to continue to promote the hiring of international students
studying in Japan.

Establishing an environment that supports “Making the Most of Our People”
As an environment that supports “Making the Most of ourPeople,” Daido Steel is promoting safety and health initiatives andwork style reform initiatives. In particular, we are concentrating on
improving expert engagement of the approximately 2,000 people
supporting our manufacturing line. At the moment, the issues ofa high turnover rate among young employees and the lack of asense of worksite solidarity have been highlighted by a lack ofcommunication at our manufacturing sites, and for Daido Steelas a manufacturing company, this has become a major problem
that we cannot overlook. As an activity to increase their45

DAIDO STEEL GROUP INTEGRATED REPORT 2023

engagement, therefore, in 2021 we began the “Making acompany that people look forward to working at every day”
project. This a support activity to bridge the generation gap
between young people and the leader class as well as the leadsupervisor class above that. This is an activity with the Chita Plant
as a model workplace, but it will be rolled out to the entire
company by making it available to be conducted autonomously.
As an activity to further increase engagement, the employee
dormitories in the Nagoya and Shibukawa areas are also being
rejuvenated.

Safety and health initiatives
Creating a workplace where employees can work with peace ofmind and each employee remains physically and mentally healthy
are parts that can be called the framework of human capitalmanagement. The basic principle of Daido Steel is safety andhealth are the source of happiness and the foundation of
corporate management, and we strive to eliminate occupational
accidents and promote health and productivity management.
At worksites these days, in addition to the problem of young
employee turnover, there is an increase in the number of young
employees who, unaware of hazards in their own workplaces, aresubject to accidents while working as usual without noticing
dangerous situations. A new mechanism is needed to improvesafety sensitivity. Since 2022, one such mechanism has been
assigning 74 veteran employees, who are well-versed in safety
education, as “safety evangelists” at each production site. In
addition to on-site guidance by these safety evangelists to young
employees and inexperienced members, and improvements intheir sensitivity to danger, this initiative improves safety byincreasing communication and fostering a sense of unity.

Safety evangelist poster

As health and productivity management, we are also working to
improve physical and mental health, and to set a rate of 50% or
higher for the evaluation “I work with mental and physical vitality”
as a KPI. Going forward, we will collaborate with industrial healthstaff and the safety teams at each plant to enhance health andproductivity management initiatives.
Promotion of health and productivity management ▶P.79,80
Initiatives to reform work style
Amid the changes to the environment surrounding the image ofwork, such as the declining working population and thediversification of work styles, we are promoting activities at Daido
Steel for various initiatives centered around the new work stylereform working group (WG) to realize a work life balance throughwork styles that match each employee.
Work style reforms ▶P.84

Elimination of occupational accidents ▶P.77,78

Toward further enhancements to corporate value
As I said at the beginning, we foresee great changes in thebusiness environment surrounding Daido Steel in the future. In
our human capital management, the Company must put into
practice the five conduct guidelines established in 2016 andevolve constantly, and as management, we must steadily
implement the “Making the Most of Our People” initiative and theestablishment of the “Making the Most of Our People”
environment. In my heart, I’m really glad that I joined thiscompany. And I have a strong desire to increase the number ofcolleagues who want to make Daido Steel a more attractive
company. For this reason, to address environmental changes,
we will consider promoting mechanisms for the acquisition of
new knowledge and skills as well as increasing the careerdevelopment options available. Our goal is to further enhance ourcorporate value by promoting activities that increase employee
engagement and make them feel glad to have joined Daido
Steel.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

46

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

DX Strategy
Examples of recent initiatives
Creation of a remelting material management system at
the Shibukawa Plant
The maintenance of remelted materials at the Shibukawa Plant
comprises various processes, and because managing the orderof processes and storage locations is complex, until now, theseprocesses have been managed using paper forms. We recently
developed an open system that achieves automated data input
and visualization of production schedules through maximum
utilization of mobile PCs and smartphones, leading to higher
productivity and preventing human errors. At the Shibukawa
Plant, a production site for free forging products, we areinvestigating links to improvements in various secondary
processes based on this mechanism.

Raising productivity in manufacturing divisions
At our production sites, we are promoting the use of data inwide-ranging fields including making the operation visible,
detection of abnormalities, and safety activities and we areworking to improve productivity and reform operations. Examples
include performing equipment inspections using drones, using AI
technology to visualize and automate skilled labor that in the past
was performed by people, and using smart watches to ascertain
the locations and health status of employees.
The implementation of smart technology at the Chita Second
Plant early in the previous fiscal year has produced advances inoperations and quality control through visualization of various
types of information, implementation of paperless operations,labor-saving through remote monitoring, and other effects. When
we install new equipment in plants in the future, we plan toestablish IT foundations by incorporating these smart technology
approaches. We also believe that it is necessary to focus ourefforts in areas such as cross-plant data management as an IT
foundation that can raise the production capacity of high valueadded products company-wide.

Increasing added value provided tocustomers by digitalizing and visualizing
internal operational data and enhancing
our ability to use it

Director, Managing Executive Officer

Akihito Kajita

Improvement of remelting material management at the Shibukawa Plant

Previous work

After

DX ensures sustainability
As a specialty steel manufacturer with an extensive productlineup, our manufacturing comprises a wide variety of production
processes including steel manufacturing, heat treatment, rolling,
and cutting. Recent advances in IT technology, particularly in thegeneration and use of data, will transform production processes
in the future and hold the potential to substantially increase
productivity, quality, and more. The skillful use of data will belargely determinative of corporate competitiveness in the future.
In addition, the core systems that have long supported theseproduction processes have accumulated the Company’s
manufacturing expertise over many years and have become
systems that literally support the Company’s backbone. We
believe that transforming this into formats that are highly flexible
and enable easy use of will be an extremely important DX topic forenhancing productivity company-wide and ensuring businesssustainability into the future.

Painted labels

Heat-resistant tag with
two-dimensional code

Paper forms

Code reading

IT budget trends

Electronic log

Work
instructions
Results record

Work
instructions
Results record(Billions of yen)

65Visual comparison
Hand-written results
record4

Relocation

Host input

On-site input to electronic log

Database server

Various development work

2

Previous work
0

2020

2021

2022

2023

After

(FY)

Current status of initiatives
Raising the efficiency of head office divisions and OArelated work
We are increasing the efficiency of head office divisions andOA-related work by making maximum use of devices including
mobile PCs, tablets, and smartphones as well as various
application tools. We used the COVID-19 pandemic as anopportunity to introduce communication tools and take othermeasures to establish remote work environments, and we maderapid progress in reforming work styles and raising work

47

DAIDO STEEL GROUP INTEGRATED REPORT 2023

efficiency. In the current fiscal year, the entire Group worked toreplace applications with new cloud-based applications for theemail, document, and schedule management systems that had
been in use for many years in an effort to raise the efficiency of
OA-related work even further. We are also actively conducting
trials of new digital products, such as generative AI, which has
recently become a major topic, and we are continuously
exploring the possibilities of their use in internal operations.

Lack ofinformation

Information gathering(on a different system)

Confirmation byphone callOn-siteconfirmation

Enhanced
information volume

DAIDO STEEL GROUP INTEGRATED REPORT 2023

48

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

DX Strategy

Utilization for R&D
At our Corporate Research & Development Center, we areundertaking materials informatics (MI) and process innovation
using machine learning including AI as well as numerical
optimization methods.
Some initiatives have produced the effect of reducing newmaterial development lead times through the collection andorganization of existing data using MI. In addition, there areindications that AI analysis (image machine learning) can beapplied to substantially reduce work times in the quantification
work of structural observation, which is essential for developing
materials. We believe that continuing these measures andexpanding them to various materials development and process
technology development fields will lead to an increase in theadded value provided to customers in the future throughaccelerated product development, shorter delivery times, andsubstantial improvement of production efficiency.

Materials informatics initiatives in R&D

Materials informatics(Forecast/discovery of new materials through chemical composition control)
Setting target
properties● Hardness/absorbing energy prediction● Structure controls

AI analysis,
chemicalcomposition
design● Continuous cooling transformation
diagram prediction, etc.

Accelerating the loop between
development data compiling and utilization

Propertyevaluations of
the prototypes

Dataaccumulation

Provision of
products

Minimizing lead time of new materials development
and increase added value to customers

Development of core systems
In the process of implementing DX, creating a picture of the
future status of host-based core systems that have been in use
for many years has become an important issue. Although
host-based core systems are stable due to their structures, they
are lacking in flexibility in terms of external connections and otheraspects, and there are difficulties relating to data use andcoordination. Also, in light of recent trends relating to hostcomputer manufacturers, we believe it is necessary to anticipate
the risk that hardware devices will not be supplied over a certain
long term period as well as the risk that it will be difficult to recruit
engineers who understand the host programming languages.
These core systems have massive numbers of logic circuits
embedded and are literally systems that support the backbone of
the Company by contributing in real time to production operations.
A fundamental review of these core systems and setting a

Education for employees
There is a sense that our employees have an adequate mindset
concerning data utilization including understanding the operating
status of equipment and quality by using data and devising
innovations for improvement, but we are working to create
opportunities for employees to learn about the latest technologies
and examples of their use such as deep learning, big datautilization, and various analysis technologies in ways adapted totheir specific business needs and roles.
With regard to data scientists, who hold the keys to datautilization, we developed 60 AI technology developers and users
by 2022, and they have already started measures to solve internal
problems. We are also reinforcing IT literacy education throughtraining for new employees and rank-specific training in an effort toraise IT use levels company-wide, and for employees in staff
positions, we measured knowledge levels concerning datautilization and provided work-related educational content. In
addition, we are working to instill a company-wide corporate
culture of using IT and making business improvements throughmeasures such as specialized education for leaders who have
responsibility forproviding guidance andcollaborating on datautilization in eachdepartment andconducting training for
managers andsupervisors.

Status of internal IT training

Cyber security measuresdirection such as transitioning to online or cloud-based computing
can substantially raise operational efficiency and productivity
throughout the Company and raise the added value that we
provide to customers even further and can also lead to avoiding
the various risks that will arise from the continued use of the hostcomputers.
Depicting our vision of future core systems and developing
them will require some effort, expense, and time, but we believethat this is an important topic that must be addressed from a
medium to long-term perspective. We established an investigationteam in the IT division to (1) ascertain current conditions
concerning the degree of complexity, black box, and bloat ofsystems, (2) research conversion methods, and (3) investigate
component structures using hub functions.

Cyberattacks have become increasingly advanced and intricate inrecent years and security risks are increasing year by year
including multiple instances in Japan of harm where key corporate
data was encrypted and a ransom was demanded for release of
the data. Until now, we have implemented countermeasures atappropriate levels including developing information management
rules, taking defensive measures, and making backups, andcurrently, we are implementing measures with a focus on thefollowing points.

❶ The parent company plays a central role in efforts to raise the levels of countermeasures with the aim of achieving compliancewith the National Institute of Standards and Technology (NIST) by the entire Daido Steel Group including domestic and overseas
companies❷ In addition to strengthening existing defensive measures, we develop countermeasures premised on intrusion including detection
and isolation❸ We establish a Computer Security Incident Response Team (CSIRT) and Security Operation Center (SOC) for the entire Daido
Steel Group including overseas sites and are establishing systems for responding to emergencies

Increasing provided value through a DX spiral
Promotion organization
In the DX promotion organization, the IT Planning Department
supervises the overall effort while the IT Planning Department
handles projects related to OA-related and existing systems, theCorporate Research & Development Center handles projects for
AI utilization, and the Advanced Manufacturing Department,
including equipment technology development, handles projects
to improve efficiency attached to production facilities.
The IT Committee, which is held once every three months,
confirms the overall policy and discusses the promotion of major
projects.

DX Promotion Organization

Management Meeting
IT Committee
IT Planning
Department

Advanced Manufacturing
Department

Corporate Research &Development Center

Overall management● Planning/constructionof overall systems● Human resources
development● Implementation on-site(IoT, visualization)● Connect with facilities,
development● R&D of AI andmathematics-related
technologies

Sales

49

DAIDO STEEL GROUP INTEGRATED REPORT 2023

PlantsHead officedivisions

Engineering

When observing DX from a technological perspective, we can see
the spread of various types of sensors that support the IoT,
high-speed communications technologies including 5G, theexpansion of cloud computing, and advanced AI technologies
including deep learning, and these technologies are evolving on adaily basis including the emergence of generative AI. In addition,
the spread of devices such as smartphones and tablets has
become an important aspect of DX.
The Company has used these technologies to solve various
problems in internal operations and to reform ways of working, but
two new sensibilities have emerged.
The first is that the idea of how to utilize these DX technologies
in actual work is crucial. We believe that developing humanresources who have a deep understanding of internal operations,have knowledge concerning DX technologies and examples of
their use, and can integrate these two areas of knowledge togenerate innovative ideas will be extremely important for
implementing DX.
The second point is that data has value only if it can be used.

There are many different types of data within the Company
including data on core systems and data from various sensors,and is believed that the volume of data is increasing greatly every
day, but this is separate from whether the data can actually be
used, and steady system-related efforts are necessary to makethis data usable.
There are still variations in the degree of digitalization and data
conversion in internal operations and the level of visualization ofthat data, but if work-related data is visualized in the form of line
charts, graphs, and so on, various things can be noticed morethan expected, and we have developed a renewed awarenessthat this can be useful for increasing efficiency, improving quality,
and so on. If we can make data usable, we will notice new thingsand generate new ideas, which will generate a spiral that leads tothe expansion of data foundations. We believe that expanding thisspiral to the entire Company will lead to enhanced
competitiveness and increased added value provided tocustomers.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

50

Innovation to Realize a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Financial Strategy
New accounting and tax initiatives

We will conduct rigorous balance sheet
management and strategic growthinvestment to achieve corporate growth
based on stable financial foundations withthe objective of increasing shareholder
returns

We are currently making preparations to apply the International
Financial Reporting Standards (IFRS), an important issue in termsof our accounting systems, and to date, we have performed fullconsolidation of Group companies and standardization of fiscal
year ends. Through the application of the IFRS, we seek toreinforce Group business management systems by using global
standard accounting rules throughout the Daido Steel Group andto deepen understanding of the Group by overseas investors.
In terms of taxes, we introduced a group income and loss

Review of product portfolio and pursuit of profitability

Director, Managing Executive Officer

Akihito Kajita

Profits in FY2022 reached record high levels
Sales volume in fiscal 2022 was down year-on-year due to adecrease in automobile-related orders caused by the extended
slump in automobile production, effects on semiconductorrelated orders from inventory adjustments through the end of the
fiscal year, and other factors. Meanwhile, raw material prices rose
to levels higher than in the previous year due to effects ofinternational market conditions and supply constraints, andenergy costs also increased significantly due to higher crude oiland LNG prices. In response, we undertook continuous
measures to thoroughly reduce costs and correct sales prices.
These measures, coupled with the effects of portfolio reforms

that we have been implementing, including expansion of highvalue-added products, resulted in the Company achieving newrecord highs for each measure of profit in fiscal 2022.
There are concerns regarding the risks that prices for raw
materials, energy, and materials will increase even further in fiscal
2023, but we expect that automobile-related demand will
gradually recover as shortages of parts, particularly
semiconductors, are steadily eliminated. In addition, as costcutting measures and sales price corrections become morewidespread, we expect that we will be able to maintain the sameprofit levels as in the previous fiscal year.

FY2021 and FY2022 results and FY2023 forecast(1,000 tons, ¥100 million)

FY2021 results

51

FY2022 results

Full-year

1H

2H

Sales volume of steel products

1,253

540

545

Net sales

5,297

2,819

Operating income

370

Ordinary income

FY2023 forecast
1H

2H

1,085

544

585

1,129

2,967

5,786

2,900

3,100

6,000

232

238

470

190

280

470

392

241

240

481

200

285

485

Extraordinary income or loss

15

-4

16

12

-

0

-

Corporate tax, etc.

-138

-54

-75

-129

-70

-95

-165

Profit attributable toowners of parent

269

183

181

364

130

190

320

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Full-year

sharing system in fiscal 2022, which allows the profits and lossesof wholly-owned domestic subsidiaries to be shared across theentire Group. As a result, in fiscal 2022, profit and loss sharing,tax effects at subsidiaries, and other factors had the effect ofraising profit attributable to owners of parent by approximately ¥3billion. We expect certain benefits of profit and loss sharing andother measures to continue to have an effect in this fiscal year
and later.

Full-year

One of the Company’s characteristics as a specialty steelmakeris an extensive variety of products, and I believe that the sourcesof this variation are the diverse production lines at our plants andthe manufacturing technologies that enable us to manufacture
products made from various types of steel across the different
factories as needed.
In order to create each product, we begin from upstream steel
production “melting and casting,” go through a multi-stage
process such as heat treatment and machining, and create
multiple products through shared equipment and processes.
Under this backdrop, in order to manage profitability, it is importantthat we fully grasp the costs that span hundreds of thousands ofitems across each product, such as costs of personnel, rawmaterials, energy, as well as depreciation expenses for equipment
required in production processes. Because improving productivity
in upstream processes contributes to reducing costs of a wide
range of products, we have formed a structure that sets detailed
targets and manages capital investment and initiatives to increase
productivity of plants and various production lines.
The precise costs that we determined in this way serve as thebasis for product prices, and also function as fundamental datathat supports decision-making concerning sales strategies andproduction operations. We established approximately 20 Strategic
Business Units (SBUs) into which our products and businesses
are categorized, and determining the status of profit and loss
individually for each SBU leads to decision-making concerning
sales strategies, production operations, and so on. The recent
sharp increases in raw materials prices and energy costs led tothe precise determination of the impacts on products andbusiness in each SBU and action including product sales pricecorrections.
In addition, profitability management of each SBU is importantfor making decisions regarding review of the product portfolio andthe pursuit of profitability by the Company as a whole. One
example of a review of the product portfolio is the decision that
the Company made in fiscal 2022 concerning the die forging

products business to withdraw from in-house production of die
forged products and production of housing products and to
specialize in the production of high-speed precision forgedproducts. At the same time, we are making strategic, large-scale
capital investments in future business growth areas such as
expanding vacuum remelting furnaces to increase production
capacity of high-performance stainless steels, superalloys,
titanium products, and other products.

Change in operating income by segment (consolidated)(Billions of yen/three-year total)
150■ Trading and service■ Engineering120■ Parts for automobile andindustrial equipment■ High-performance materials andmagnetic materials■ Specialty steel

90

60

30

0

2012–20142015–20172018–20202021–2023(FY)(Figures for FY2023 are planned values)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

52

Innovation to Realize a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Financial Strategy

Measures for improving the balance sheet and cash flows
The Company’s balance sheet includes a substantial volume ofinventory assets necessary for production processes, and thebalance of trade payables is low in comparison to the balance oftrade receivables. As a result, our business structure requires
large sums of operating capital. Because the Company produces
many different types of products with high added value, we use
multi-stage production processes that require considerable
production lead time, and a certain degree of inventory assets isessential. In addition, the relatively short payment periods for raw
materials and energy are also a factor behind the low balance oftrade payables in comparison to the balance of trade receivables.
As a result of these circumstances, the increases in raw
materials prices and energy costs since about 2020 have led toincreases in operating capital, and as a result, in fiscal 2021,
despite a substantial increase in profit for the fiscal year, free cash
flows turned negative and interest-bearing debt increased. Basedon a rough calculation, if prices relating to manufacturing increaseby 20%, the shareholders’ equity ratio will drop by approximately 4
points, the D/E ratio will increase by approximately 0.15, and
ROIC will decrease by 0.4% due to the increase in operating
capital and the accompanying increase in interest-bearing debt.
This has renewed our awareness of the degree of impact thatrising prices for goods has on the Company’s cash flows andvarious financial and profitability indicators.
In fiscal 2022, the pace of increases in raw material prices andenergy costs slowed, and as a result free cash flows turned
positive and interest-bearing debt is trending downward, but weremain aware that streamlining inventory assets by raisingproduction efficiency and reducing the imbalance between tradereceivables and trade payables or financial issues that we must
steadily address.
In addition, reducing cross-shareholdings, which account for asignificant portion of the balance sheet, is also a financial issue tobe addressed. The Company’s cross-shareholdings are primarily
shares of partners or buyers related to product development andmanufacturing or suppliers of raw materials and resources. These
are held to construct solid relationships with partners and buyers
through joint development and so on, but in light of recent social
developments regarding corporate governance, we have taken
measures until now to reduce these cross-shareholdings. We
continued these measures in fiscal 2022, and as of March 31,
2023, the ratio of cross-shareholdings to net assets was 24.3%
on a basis including deemed cross-shareholdings and 17.7% on
a basis excluding deemed cross-shareholdings. Our short-termtarget is to reduce the cross-shareholdings to 20% or less of net
assets on a basis including deemed cross-shareholdings by
March 31, 2024, which is the final year of the 2023 Medium-Term
Management Plan. Our policy concerning the proceeds from thesale of cross-shareholdings is to actively invest the funds inmeasures for achieving carbon neutrality.

Changes in free cash flows (before deducting dividends)(Billions of yen)
26.1
24.7
25.9

34.3

24.3

1.7
-5.6

4.4

12.6

-3.0
-5.1

-18.0
-11.4

39.2

48.1

■ Depreciation

2.5■ Ordinary income

-4.6
-77.6

-29.4

-39.2

-33.7

■ Changes in operating capital-39.6

Accumulated total fromFY2021 to FY2023 (forecast)¥90 billion

高付大■ Business foundation investments: ¥82 billion
Strategic investment(portfolio reform, cost and productivity
improvement), CO2 reduction,
rebuilding business foundations, etc.

知■ IT Investments: ¥4 billion
Reinforcing quality control systems,
reforming working styles,
building DX foundations, etc.

高■ Human resources investments: ¥4 billion
Human resource development, health andproductivity management, etc.

Policy on shareholder returns
The Company’s dividend policy is to maintain stable shareholder
returns, and in the 2023 Medium-Term Management Plan, weraised the shareholder returns target from a dividend payout ratioof 20%–25% to a dividend payout ratio of 30%. Based on thislevel, the Company declared a dividend of ¥230 per share forfiscal 2022, a record high amount. Going forward, we will actively

(Yen)
300

make strategic growth investments to capture growth markets inconjunction with the electrification of vehicles and decarbonization
and we will invest in carbon neutrality while performing balance
sheet management with the objectives of increasing profits further
and raising the actual amounts of shareholder returns.

(%)
40

Dividend amount per share (left scale)
Dividend payout ratio (right scale)

230

225

■ Investment C/F

30

30.6

■ Taxes, etc.

-12.0

-31.3

Under the 2020 Medium-Term Management Plan, we proactively
made investments that exceeded depreciation expenses, such as
strengthening secondary processing capabilities, reinforcing
remelting equipment, and building the Nakatsugawa Advanced
Magnetic Materials Development Center in order to enhance
manufacturing capabilities in strategic areas such as highperformance materials and magnetic materials. These investments
are firmly linked to transforming the product portfolio and thecorresponding enhancement of profitability. Under the 2023
Medium-Term Management Plan, we plan to make strategic
investments to reform the portfolio and improve cost andproductivity even further and to make capital investments at highlevels with a focus on investments for reducing CO2 and rebuilding
business foundations. We project that total investment over three
years including IT investment for developing DX foundations andreforming working styles and human resource investment todevelop and secure human resources will be ¥90 billion.

Dividends

26.8

23.2

Current investment plan

150

20

75

10

-20.1

FCF (before deducting dividends)
2018

2019

2020

-5.1
-14.6

2021

2022

(FY)
0

2018

53

DAIDO STEEL GROUP INTEGRATED REPORT 2023

2019

2020

2021

2022

2023
Plan

0
(FY)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

54

Innovation to Realize a Green Society
Business Strategy

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Specialty Steel Business Division &Tool Steel Business Division
Responding to the changing needs ofsociety through an extensive productlineup and advanced technologicaland proposal capabilities
Representative Executive Director,
Executive Vice President and General Manager,
Specialty Steel Business Division

Toshiaki Yamashita
The Specialty Steel Business Division handles sales of specialty steel and high-performance specialty steel, mainstay products of the Company
that comprise more than 80% of all sales. The products that the division handles are used in a wide range of fields including automobiles,
industrial machinery, semiconductor manufacturing equipment, medical, and consumer-related. In addition, the Tool Steel Business Division
handles mold steel used in the manufacture of automobile parts, consumer electronics products, and mechanical equipment. The pace ofchange in society has been increasing, exemplified by initiatives for achieving a decarbonized society and technological innovation in theautomobile industry referred to as CASE. We actively respond to new needs through our extensive product lineup and advanced technologicaland proposal capabilities.

Main products and contributions to society
Specialty Steel Business Division● Specialty steel: Steel bars and wires such as carbon steel andalloy steel for machine structures, spring steel, bearing steel, andfree-cutting steel
These products are used in a wide range of applications as
structural components in automobiles (engines, drive systemparts, etc.), construction machinery, industrial machinery, and soon. In conjunction with future advances in CASE, the need formaterials used in gear reducers for high-performance e-Axles in
automobiles and other components will increase even more. We
are honing our materials
development and proposal
capabilities and actively
communicating withcustomers to achievecarbon neutrality.

Specialty steel (steel bars)● High-performance specialty steel: Stainless steel, superalloy bars

and wires, titanium, and welding material
Stainless steel is a type of steel that has excellent characteristics
including corrosion resistance, workability, and heat resistanceand is used in a broad range of applications including kitchenutensils, building materials, machine structural parts, medical
devices and equipment, and chemical industry equipment parts.
Our steel bar and wire products boast the top market shares inJapan.
Ultra-clean steel (CLEANSTAR) made using our specialized
melting technology is used in the field of semiconductor

55

Daido Steel’s Value
Creation Story

DAIDO STEEL GROUP INTEGRATED REPORT 2023

manufacturing equipment and will contribute to the developmentof a society where AI is common and digitalization has advanced.
Titanium has excellent properties such as light weight, highstrength, corrosion resistance, biocompatibility, and absence ofmagnetism, and it is anenvironmentally friendly material
suitable for recycling. It is also
widely used in consumer-related
fields (golf equipment, fishingequipment, eyeglasses, bicycles,
and so on), particularly in medical.
Stainless steel materials (wires)

Tool Steel Business Division● High-performance tool steel
Tool steel is used as a mold material employed in the
manufacture of the many industrial products that we encounterevery day including automobiles, consumer electronics, and foodcontainers. Parts for which demand is expected to increase in
the future in conjunction with the electrification of automobiles,
such as motors and batteries,
will require higher quality andmore stable moldcharacteristics compared toearlier products, andconsequently, we provide
high-performance materials thatcan contribute to responses tothese needs.

Progress and outlook of the medium-term management plan
Specialty steel❶ Strengthen management’ agility: To respond in a timely manner
to fluctuations in costs, in addition to the existing surcharge
scheme for iron scrap, we are expanding the introduction ofsurcharge schemes for energy and other expenses.
❷ Boost the volume of base orders: In anticipation of decreasing
demand for specialty steel in conjunction with the spread ofelectric vehicles in the future, we are taking action to increase
our market shares with existing customers and actively
working to acquire business from new customers. We arealso taking measures to ascertain needs for electric arc
furnace materials to achieve carbon neutrality.
 roactively expand sales of new products: To meet demand in❸Pareas where growth is expected such as e-Axle gear reducers
used in electric vehicles, we are developing products andworking to expand sales.
Stainless steel, superalloy bars and wires, titanium,
welding materials❶ Actively expand sales of growth products: In relation tosemiconductor manufacturing equipment, we are reinforcing
specialized melting and secondary processing, securing
production capacity to meet the expanding demand for
ultra-clean steel, and engaging in proactive sales activities toexpand our share of the North American market.
❷ Develop new products: In relation to hydrogen, we aredeveloping steels that are resistant to hydrogen embrittlement
and conducting public relations activities at exhibitions and soon. Going forward, we will make proposals to customers in
Daido Steel specialty steel demand forecast(Index with FY2017 set to 100)

100

Environmental changes(electrification, etc.)

collaboration with pipe manufacturers. We will also expand
sales in new fields such as titanium alloys for biological use,
high-strength invar wire, and welding materials for additive
manufacturing.
❸ Expand sales in overseas markets: To expand market shares forhigh-performance materials in Asian markets, we established
Daido Steel Materials Technology Shanghai Co., Ltd. as asales base in China, established a secondary processing sitein Thailand, and are taking measures to expand sales.
Tool steel❶ Reinforce the earnings base: We will transition to appropriate
prices in response to higher costs for energy and materials
and changes in prices for alloys and scrap. We will also takecomprehensive measures to reduce manufacturing costs,
particularly for melting processes, with the aim of enhancing
our cost competitiveness further.
❷ Develop new products: We will develop new products throughco-creation with customers so we can respond to the needfor high-performance mold steel suitable for new parts
demand in conjunction with the electrification of vehicles.
❸ Reinforce sales networks: In Japan, we will work to improvevalue provided through processing, heat treatment, surface
treatment, and in other areas with a particular focus on Daido
Die & Mold Steel Solutions Co., Ltd. Overseas, we will seek
to enhance the functions of sales hubs in each country
through active capital investment with a focus on the markets
in India and Vietnam, where future growth is expected.

Changes in orders received for ultra-clean stainless steel

Boost base demand
Expand growth products(Index with FY2017 set to 100)

100

2017 2018 2019 2020 2021 2022 2023

2035 2050(FY)

2017 2018 2019 2020 2021 2022 2023

2035 2050(FY)

Long-term issues and outlook
Specialty steel/high-performance specialty steel• Environmental awareness (risks and opportunities): The decline in demand
over the long term in conjunction with the spread of electric vehicles (EVs) will
be unavoidable, but high-performance materials will be needed due to theadvanced performance of automobiles and the global increase in
semiconductor demand. Amidst these developments, we will reinforce
measures in areas where substantial growth is expected including CASE,
semiconductor-related products, and clean energy.
• Strengthen management’ agility: We will improve production efficiency in fields
where existing specialty steels will remain in demand, such as automotive
suspension parts and bearings, and build a structure that enables us to secure
profits even as the volume of order declines.
• Respond to carbon neutrality: Increases are expected in the need for specialty
steel manufactured in electric furnaces, which have lower CO2 emissions

compared to blast furnaces, particularly for automobile-related products. We
will leverage the strong relationships with customers that we have built up overmany years to identify needs and respond to them in a timely manner.
Tool steel products• E xpand the share of domestic mold markets: The long-term contraction of themarket is continuing, and lower demand due to declining domestic demandand other factors will be unavoidable, so we will work to expand our market
share by developing new products and reinforcing collaboration with
distribution companies.
• R einforce activities in overseas markets: In addition to the ASEAN region, there
are strong expectations for growth in the Indian market and other markets, so
we will actively reinforce our sales network to achieve continuous growth oforders received.

Mold steel

DAIDO STEEL GROUP INTEGRATED REPORT 2023

56

Innovation to Realize a Green Society
Business Strategy

Daido Steel’s Value
Creation Story

Introduction

Managing Executive Officer and General Manager,
Fabricated Materials Business Division

Muneyoshi Matsuo
The Fabricated Materials Business Division supplies superalloys and high-performance materials that are essential for solving global-scale issues
relating to the SDGs, such as protection of the global environment, energy-saving, and raising standards of living, with the world’s highest levels of
quality (Q), cost (C), and delivery times (D), fulfilling our social responsibilities by growing into a trusted and valuable specialty steel manufacturer.
In addition, we set as an important policy that will apply going forward the maximization of use of alloy scrap generated during manufacturing
processes including scrap generated in-house, scrap generated by customers, and scrap traded in the market, and we are working to create
sustainable business schemes.

Main products and contribution to society
The Fabricated Materials Business Division contributes to social
development by providing numerous high-performance materials
that support the daily lives of people and production activities invarious industries in areas such as (1) aircraft, (2) ships, (3)semiconductors, (4) heavy electrical equipment (thermal andnuclear power), (5) drilling, and (6) industrial machinery. With
regard to aircraft and ships in particular, by supplying nickelbased alloy materials that are essential for increasing engine
efficiency and reducing CO2 emissions to engine makers, we arecontributing to engines that can comply with strict environmental
regulations. In addition, we are working with engine makers toincrease material recycling rates by collecting scrap generated
during product manufacturing processes and products discarded
at the end of their useful lives.
Nickel alloy shaft and disc material for use in aircraft engines
In 2014, the company became the first specialty steel
manufacturer in Asia to make a full-scale entry into the market for
nickel superalloys for aircraft (rotating components), which require
extremely high quality and rigorous management. We obtained
manufacturing certification from U.S.-based PW, and delivered
6,000 shafts and other parts over the next eight years.

Corporate Data

Based on performance that was free of even a single problem
during that time, we are currently conducting negotiations toreceive certification from a second and third manufacturer. In the
future, we plan to sign long-term nickel superalloys business
contracts with the world’s leading aircraft engine manufacturers
and to expand this business through a sustainable scheme
whereby scrap generated in customer processes is used as araw material.
Nickel alloy exhaust valve for large ship engines
Regulation of NOx and SOx emissions from ships is becoming
stricter as an environmental countermeasure, and operating
conditions in marine areas subject to environmental regulation
have become more stringent. As a result, the progression of
exhaust valve corrosion from sulfur (S) in fuel has become anissue concerning ship engines in recent years.
We developed DSA760, a Daido Steel brand steel that can
reduce the progression of corrosion by up to one-third comparedto earlier materials. We received certification from major ship
engine manufacturers and have been producing approximately
800 units per month since 2018. We are working to create asustainable recycling system by collecting discarded valvesarising as a result of replacement demand and using the
discarded products as raw
materials for replacements.

Progress and outlook of the medium-term management plan
Under the 2023 Medium-Term Management Plan, we set (1)expanding high-performance materials, (2) entering thedecarbonization business, and (3) expanding global sales as ourfundamental strategies and set targets of achieving a superalloy
ratio of 34% and overseas sales ratio of 41% and increasingorders received by 8% (compared to fiscal 2017 to 2019)
through portfolio reform.
Regarding strategy (1), we have taken action with a focus on
expanding sales of superalloys, particularly nickel-based alloys.
Achievements include reducing manufacturing lead times byinvesting in super alloy production equipment through fiscal
2021, increasing manufacturing certifications obtained from
customers, increasing domestic and overseas orders for superalloys by conducting aggressive sales activities targetingoverseas super alloy wholesalers and introducing brand steels,and as a result, the ratio of superalloys among orders received
reached 51%, substantially exceeding the target.
Concerning strategy (2), we are conducting technical exchanges
concerning the high-performance materials needed for a hydrogenbased society including hydrogen stations and hydrogen carrier
ships and materials for nuclear and fusion power generation, which
are power sources that do not emit CO2. We already started
production of prototypes of some of these materials, and we areestablishing the foundations for the next medium-term period.
Regarding strategy (3), we developed sales human resources
to target overseas markets and assigned personnel to overseas
sites, resulting in a rapid expansion of overseas customers, andthe ratio of overseas sales reached 53%, greatly exceeding thetarget as well.
By carrying out these three fundamental strategies, theFabricated Materials Business Division has made progress on

Current orders for fabricated materials have reached the limit of the production
capacity of facilities, and consequently, developing production systems thatcan supply products without delay has become a priority issue. In addition,using scrap that includes nickel will be essential for achieving a sustainablesuperalloy business. To address these issues, we have decided to invest in
three VARs, one forging heating furnace, and a second raw material
pretreatment device to increase the capacity of vacuum induction melting (VIM)
furnaces, vacuum arc remelting (VAR) furnaces, high-speed four-surface
forging machines, and preprocessing (crushing and washing) of scrap
materials in order to recycle scrap that is generated in-house and by

Orders received for superalloys and high-performancematerials
(%)
300

Daido

Product appearance

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Engine for large ships(%) Changes in orders received compared to FY2017–2019
250

0

231

195

200

150

■ Drilling

118
100

■ Semiconductors

100

108

■ Plants

71■ Ships■ Heavy electricalequipment

50■ Aircrafts

0

2017–
2019

2020

2021

2022

2023 (FY)
Midterm2023(Apr.–Jun.)customers, which are all essential for superalloy production. In addition, we
are working on the development of schemes in the aircraft and drilling fields,
areas where the use of superalloys is high, to conclude contracts for prices
premised on recovering scrap with customers who have the largest shares of
the global market. We see the tripling the superalloy and high-performance bar
businesses, which have high levels of social contribution, from current levels
while simultaneously recycling scrap generated within business schemes as
raw materials to develop the superalloy business into a stable and sustainablebusiness as a long-term issue.

2023

2030

(Year)

Scrap recovery➡

Machine processing

Customer0

Forging and heat
treatment

Processed scrap
Scrap occurs withnearly all in-houseand customer
products

Machine processing■ Superalloys for drilling(rolling and forging)

100

➡
➡

■ SUS for semiconductors

Flame front
Cylinder interior

40

Melting and ingot casting

Seat face

Large ship41%-●- Overseas ratio-●- Superalloy ratio 34% 20

41%

Scrap pretreatment■ Superalloys for aircraft
100

Ignition point(image of fuel injection)

60

53%
51%

43%

➡

200

Exhaust gas

Low pressure High pressure Combustor Turbine
compressor compressor
LPT
HPT

Changes in orders received for fabricated materials and 2023 Medium-Term
Ratio of orders received (%)
Management Plan

Fabricated superalloy and high-performance product sales expansion plan297

HPT shaftRotary vane

portfolio reforms and obtained orders in 2022 that greatly
exceeded the target (195%), and is expanding even further in2023.
In this fashion, recognition of Daido Steel as a supplier ofhigh-performance materials and superalloys is rapidly increasing
both in Japan and overseas. We will also continue our efforts tobe recognized as Asia’s No. 1 manufacturer of superalloys andhigh-performance materials in the near future.

Long-term issues and outlook

Exhaust valve

57

Contribution to Realizing a
Green Society

Fabricated Materials Business Division
Leaping forward and growing tobecome Asia’s No. 1 manufacturerof superalloys and high-performancematerials, contributing to thedevelopment of a sustainable society

Aircraft engine

Innovation to Realize a
Green Society➡

Attachment(some waste scrap isgenerated)

Waste scrap from ship engine valves

Product appearance

DAIDO STEEL GROUP INTEGRATED REPORT 2023

58

Innovation to Realize a Green Society
Business Strategy

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Functional Products Business Division
Supporting society with productsthat provide advanced functions that
go beyond specializations
Managing Executive Officer and General Manager,
Functional Products Business Division

Ikuo Sugie

With contributing to a sustainable society through the expansion of business in fast-growing fields and strengthening future “earning power” sothat the Daido Group can achieve sustainable growth as its core mission, the Functional Products Business Division focuses on product lines
equipped with functions such as magnetism and thermal expansion for which growth in demand is expected in conjunction with the electrificationof automobiles and industrial equipment.
The Division consists of various product departments for steel strips, metal powders, and electronic materials and the Next-Generation Products
Development Center, which is tasked with the creation of new products and businesses.

Main products and contributions to society
Contributing to society with functional products
The Functional Products Business Division plans to expand
business in fast-growing fields, such as CASE, ICT, and nextgeneration energy, as post-internal combustion engine products
and will contribute to society.

● Metal Powder Department◦Corrosion and heat resistant materials for automobile internal
combustion engines◦High-performance soft magnetic powder for xEV (powder for reactors)◦Stainless steel powder for sintering for automobile parts and industrial
machinery, powder for 3D additive manufacturing● Examples of products

Power split device

Strip steel made from soft magnetic/resistive materials, strip steel
for separator in SOFC/SOEC, high magnetic flux density strip steel
for motor cores
High-performance soft magnetic powders, lithium-ion battery
anode material (active material), magnetic shield sheets, etc.

EngineGenerator

Soft magnetic powder

Iron core

Progress and outlook of the medium-term management planIn fiscal 2022, adjustments of automobile-related inventories
became prolonged in conjunction with the shortage of parts
including semiconductors, and sales volume was down year-onyear due to the slump in electrical and electronic device andsemiconductor related demand, but electric vehicle related
demand was strong. In addition, the transfer of higher prices for
raw materials and energy to sales prices progressed, and weachieved both our sales and profit targets under the 2023
Medium-Term Management Plan.
Steel Strip Department
The department achieved net sales of heat-resistant materials forinternal combustion engine applications, its main products, aswell as soft magnetic materials and resistor materials for CASE
and electrical and electronic applications in excess of plans. The
department is also developing new products, such as highperformance motor materials used in air mobility as well as steel
strips used for methanation-related applications, which are
attracting attention in relation to carbon neutrality, and is working
to commercialize these new products for the future.
Metal Powder Department
Sales of products for automobile internal combustion engines,
which account for a majority of product sales, remained strongas the department worked to enhance its cost competitivenessand engaged in co-creation with customers. In relation to CASE,
the department is working to maintain and expand market sharesfor high-performance soft magnetic powders used in xEVreactors, develop next-generation models, and develop new
applications such as automotive power inductors. The
department is also focusing its attention on powders for 3D
additive manufacturing and is reinforcing supply systems andexpanding its lineup in anticipation of increasing demand in thedie field including tool steel as well as for plants, power
generation, and other applications.

Electronic Materials Department
Sales of target materials for functional thin films and point lightsource LEDs, the department’s main products, remained strong.
Regarding target materials for functional thin films, the department
is developing new products and working to expand sales of
products that meet changing needs, such as power
semiconductor applications, an area where market growth isexpected, and larger and curved automotive touch panels. For
point light source LEDs, in fiscal 2022, the department tripledproduction capacity from the existing level and is taking action toreinforce supply structures and deploy new products.
Next-Generation Products Development Center
Progress in commercialization is being made in a number ofthemes, including materials for lithium-ion battery anodes (active
materials). In addition, planning and development are underway
in cooperation with individual product departments and the
Corporate Research & Development Center concerning
commercialization topics that apply new soft magnetic materials.

Net sales of the Functional Products Business Division(Billions of yen) ■ Steel Strip Dept. ■ Metal Powder Dept. ■ Electronic Materials Dept.
63.0

25.2

2017

28.2

2018

24.0

21.9

2019

2020

31.6

33.9

35.7

2021

2022

2023

31.6

2035

2050

(FY)

Booster circuit
Reactor● Steel Strip Department◦Current sensor relays and torque sensors for CASE and electrical andelectronic devices, soft magnetic materials for shunt resistors, resistor
materials, sealing materials◦Corrosion resistance materials for semiconductor equipment, welding
materials for ships and industrial machinery◦Shielded boxes for high-precision industrial inspection, shieldedrooms for high-precision medical imaging

Long-term issues and outlook
Battery
Inverter

We will expand business in growth markets including CASE, ICT, andnext-generation energy, thereby contributing to society, while steadily
overcoming issues.

Power control unit
Motor

Reactor component for HEVs and
PHEVs

Example of use in a booster circuit for
HEVs and PHEVs● Electronic Materials Department◦Power semiconductors, touch panels, target materials for functional
thin films for cutting tools, etc.
◦Optical encoders for high-precision servo motors, point light source
LEDs for optical sensors

Hermetic seals (stemand lens caps)

LED

Light receiving element

Amplifier circuit

OutputsignalSteel Strip Department• T he department will reform its portfolio and expand sales in growth markets
including CASE and ICT.
• Development of new products and new technologies: The department will
invest in the technologies, quality, and facilities necessary for expanding
sales.
• Reinforcing business foundations: The department will reduce manufacturingcosts, raise production efficiency, and reinforce production capacity.

Metal Powder Department• Expanding growth products/deepening manufacturing processes: The
department will deepen high-yield gas powder production technology,
development of superalloys and high-performance powders, and secondary
processing technologies including insulation coatings, etc.
•C reating future products: The department will develop powders for lithiumion battery anodes, start mass production of automotive power inductor
powders, and develop reactor powders for BEV charging and current
collector powders for SOFC applications.
Electronic Materials Department• The department will seek to expand business by increasing the number of
products related to vehicle electrification and semiconductors and deploying
applications for SmFeN magnetic powders.

Rotation shaft
Aperture

Point light source LED

Bellows (semiconductor manufacturing
equipment components)

59

Code wheel (slit disc)

Example of use in an optical encoder

High-performance magnetic
shielded boxes

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

60

Innovation to Realize a Green Society
Business Strategy

Daido Steel’s Value
Creation Story

Introduction

Machinery Division

Innovation to Realize a
Green Society

Progress and outlook of the medium-term management plan
Note: The SDGs characters of the Machinery Division

we seek to create a sustainable society using thermal technology
with a focus on electric furnaces®
Thermo-tainable Experience the passion that enabled us to manage technology
and together let’s continue to challenge what is possible.
Managing Executive Officer,
responsible for
Machinery Division

Yuji Noguchi

Note: The SDGs logo of the Machinery Division

We are working to achieve the SDGs through thermo tech (thermal technology)

We are carrying out the 2023 Medium-Term Management Plan
with the fusion of industrial furnace operating technologies andequipment technologies as the key concept.
Proposing products and services aimed at achievingcarbon neutrality● We are taking active measures to expand sales with a focus
on products that reduce CO2 emissions including electric arc
furnaces with rotating drives (STARQ®) and the Premium STC®
Furnace (2nd generation).
● We developed the radiant tube type Daido burner, which useshydrogen as fuel (press announcement made in December2022). We will continue to develop demonstration models withthe aim of installing them on the next-generation Premium
STC® Furnace.
Image of our future product portfolio

Daido Steel is one of the few companies in the world that not only manufactures specialty steel, but also designs and manufactures steel
manufacturing facilities and heat treatment equipment including electric furnaces.
We have both the operational technologies and cutting-edge equipment technologies for high-efficiency production of steel products. By providing
these technologies to customers, we are contributing to the realization of carbon neutrality in the world’s industries.
In addition, environmental products that use our thermal technologies play a role in the circular economy by transforming waste into useful
resources, and we will continue our contributions in this field for the development of a sustainable society in the future.

Existing products
46%¥6.3 billion
Ordersreceived¥13.6 billion/yearCE
33%¥4.5 billion●H eat treatment equipment: Premium STC® Furnace (2nd generation)
The Premium STC® Furnace (2nd generation), equipped withnew functions to enhance energy savings and environmental
performance, achieves substantial energy savings, improved IoTfunctionality, and shorter operating times compared to earlier
STC furnaces and achieves a 15% reduction in fuel gas, 30%
reduction in nitrogen gas, and 11% reduction in CO2 emissions
compared to standard model 20 furnaces.
● E nvironmental preservation equipment: Next-generation sewage sludge
carbonization system (ultra-high-temperature carbonizing furnace)
In the environmental products field, we developed ultra-hightemperature technology for heating sludge to 1000°C or higher for
steaming and incineration. The carbonized products created using
this technology can be used as high value-added products
including activated carbon alternatives and detoxified soil
enhancement materials.
(A Ministry of Land, Infrastructure, Transport and Tourism’s 2023
Breakthrough by Dynamic Approach in Sewage High Technology
Project (B-DASH project))

CN: Carbon neutral products
CE: Circular economy products

Transforming business and manufacturing by using digitaltechnology● We are working to introduce a unified management system forproduct information that links design and installation data andto reinforce 3D CAD with the aim of raising operational
efficiency to expand sales.

(Billions of yen) ■ Carbon neutral products■ Existing products■ Circular economy products

2030
Product portfolio

CN 21%¥2.8 billion

Develop global markets that contribute to the growth of
the Asian market● We will build collaborative relationships with partners in Asia sothat we can contribute to the development of customers’
overseas supply chains.
● We have made long-term appointments of engineers to someregions and are working to expand our maintenance service
territories.

Machinery Division order results and plans

2022
Product portfolio

Main products and contributions to society● S teel making equipment: Electric arc furnaces with rotating drives (STARQ®)
The STARQ® electric arc furnaces with rotating drives are able toefficiently transfer heat by rotating the furnace body during scrap
iron melting, reducing electric power input in achieving uniform
melting. The 150 arc furnace STARQ® at the Chita Plant
achieved a 15% improvement in energy consumption throughout
the entire process from melting to casting compared to the earlier
80 arc furnace.

Existing
Existing products
products
6%¥1.8 billion Maintenance Orders

13.7
2.0

received
CE¥30 billion/year Electric arc
furnaces
29% Environmental
products¥8.7 billion
Heat treatment
CNfurnaces65%¥19.5 billion

4.2

4.0

5.0

4.2

2017

2018

2019

2020

6.5

9.3
2.4
2.7

Developing innovative carbon neutral technologies●B y developing electric arc furnace technologies, which must
continuously evolve, we will play a leading role in achievingcarbon neutrality of the world’s steel making equipment.

GX strategy for electric arc furnaces

61

Ultra-hightemperature
carbonized products

STEP2
Energy-saving large
electric arc furnaces

Develop large electric arc furnaces withhigh CN performance and capture electric arc
furnace demand for blast furnaces

Achievementof CN

Enhance the CN performance of GX
strategy products to capture demandin growing overseas markets

2.0

4.5

4.5

2022

2023

1.8

3.2

8.7

5.8

2026 2029
Midterm Midterm (FY)

Achieve both larger scale andease of maintenanceAchieve high-capacity power sources

50%
reduction

Premium STC® Furnace (2nd generation)
Reduce CO2 by 11%

Reduce CO2 by 75% compared tocurrent blast furnaces
2026

2030

Legend Hardware technology Software technology

Achievementof CN

Image of CO2 reductionin the steel making industry

2050

50%
reduction

Hydrogen combustion technology
Automation of operation

Energy-saving electric arc furnaces

Earlier electricarc furnaces

STEP2 Reduce CO2 by 100%
CN Premium STC® Furnace

Reduce CO2 by 80%
STEP1
Premium STC® Furnace (3rd generation)

Automated and autonomous operation

STEP1
Large electricarc furnaces

Assumptions: CO2-free electric power, hydrogen

Employ methanation technology

Development and application ofenergy-saving technology

2023

Ultra-high-temperature
exhaust gas
used for carbonization

6.3●W e will achieve practical use of hydrogen combustion burners
and adopt methanation technology for commercial furnace
applications to advance development for achieving thecomplete decarbonization of heat treatment furnaces.
GX strategy for heat treatment furnaces

Assumptions: CO2-free electric power, hydrogen

Reduce CO2 by 5% to 13%(1000°C or higher)

9.0
8.5

Results Plan

Ensure the quality of molten steel

Waste heatrecoveryand use

2021

15.0

13.6
2.8

* Circular economy products: Products designed to achieve a circular economy

Efficient melting of various materials(800°C)

19.5

18.0

15.7
9.4
2.5
4.8
0.6 2.3
1.1
4.6
3.1

7.7

30.0

Long-term issues and outlook

SludgeElectric arc furnaces with rotating drives(STARQ®)

Corporate Data

Thermotie★Taki Thermotie★HaruTogether, with passion,and looking to the future,

Contributions to green transformation (GX) with energysaving products and environmental products
Ten of our products including the electric arc furnace with rotating
drives (STARQ®) and Premium STC® Furnace (2nd generation)
were selected for the Advanced Energy Conservation Investment
Promotion & Energy Demand Structure Transformation Support
Program as “advanced equipment and systems” certified by the
Agency for Natural Resources and Energy under the fiscal 2022
revised budget.

Contribution to Realizing a
Green Society

Deploy excellent decarbonization
technologies in ASEAN, China, and India

1st generation: Reduced CO2 by 6% starting in 2017
2nd generation: Reduced CO2 by 11% starting in 2023
(Note: Compared to STC furnaces)
Image of CO2 reductionin the steel making industry

STC® Furnace
2023

2026

2030

2050

Legend Hardware technology Software technology

Next-generation sewage sludge carbonization system (ultra-high-temperature
carbonizing furnace)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

62

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Response to Risks and Opportunities

Materiality

The environment in which we operate is undergoing dramatic change, such as mobility innovation and energy transition toaddress climate change. By grasping the risks and opportunities arising from changes in the external environment andmaking use of them as new business opportunities, we aim to grow sustainably and enhance corporate value by identifying
and promoting the thematic roles that the Company should fulfill.

Materiality(1) Initiatives toaddress climatechange1. P reservation of
the global
environment(business
activities)(2) Transition to acircular economy(3) Technologicalinnovation forenergy transition

2. Preservation of
the global
environment(product
supply)(4) Improvements inenergy efficiency(5) Effective utilizationof natural
resources

63

Risk

Opportunity

Daido Steel’s role
Reduce CO2 emissions through theuse of energy-saving measures,decarbonized electricity sources,and decarbonization technology• Rise in electricity costs caused byincreased use of renewableenergy• Increase in operating and material
procurement costs caused by the
introduction of carbon pricing• Suspension of operation at plantsof the Company or its supplierscaused by increases in natural
disasters•G ain the trust of stakeholders in thePrime Market, and improved
evaluations, by addressing TCFD

• Increased procurement costs due
to higher prices for high-grade
scrap, for which demand has
increased• Operation of plants in regions witha risk of water shortages• R educed material costs throughexpansion of the use of cheap scrap• R educed disposal costs throughexpansion of the 3Rs of byproducts• R educed risk of drought througheffective utilization of water
resources

Recycle scrap through use ofelectric arc furnaces• Increased demand for highperformance materials caused by
the progressive shift to electricvehicles• Increased demand for hydrogen
embrittlement resistance steel andother products arising fromprogressive shift to hydrogensociety

Supply of products to addressmobility innovation• Reduced demand for internal
combustion engine components
caused by progressive shift toelectric vehicles• Reduced share due tocompetitors taking technologicallead• Reduced share due tocompetitors taking technologicallead• Entering market for electric arc
furnaces for blast furnace
manufacturers• Unstable procurement of raw
materials such as rare metals
associated with highenvironmental and social risks• Water-related risks: drought,
extreme torrential rain, waterpollution

DAIDO STEEL GROUP INTEGRATED REPORT 2023

• R ising in demand for electric arc
furnace materials and engineering
to address environmental issues• R ising demand for transition fromconverters to electric furnaces• Rising demand for equipment driven
by progressive shift to digital society• R ising demand for products that do
not use natural resources such as
rare metals• R ising demand for products thatfacilitate the conservation andeffective utilization of water
resources

Enhance absorption of CO2 throughactivities that preserve the naturalenvironment

3. Responsibilities
andcontributions tosociety

Expansion of the 3Rs of byproducts
Conservation of water resources

Supply of products that contribute toclean energy businessSupply of products that support
technological innovations addressing
environmental regulations

Supply materials, facilities andequipment with outstanding energy
efficiency

Supply products that conserve
resources and do not include
hazardous elements
Supply materials, facilities andequipment that contribute to the
reduction and effective utilization ofwaste
Supply products that help securewater resources

4. Strengthening
governance

Innovation to Realize a
Green Society

Risk

Contribution to Realizing a
Green Society
Corporate Data

Opportunity

Daido Steel’s role(6) Respect forhuman rights• Loss of business opportunities
due to inadequate response tolaws and regulations and thedemands of society• Reduced employee motivationand productivity due to inadequate
initiatives within the Company• Gain trust of stakeholders• Enhance employee productivity
through internal initiatives

Strengthen global initiatives forrespect for human rights(7) Human1) Elimination ofoccupational
accidents• Accidents and fires during
operation of major facilities• Enhanced productivity through safe
operation

Roll out key health and safetymeasures2) Promotion ofhealth andproductivity
management• Infectious disease leading toparalysis of business activities• Enhanced productivity due topromotion of better health

Promote better health among
employees3) Promotion ofdiversity• Failure to recruit and develop
sufficient personnel due to thedeclining birthrate and aging ofsociety• Generation of innovation throughacquisition of diverse humanresources

4) Work stylereforms• Reduced employee motivation
due to inadequate workplaceenvironment and employment
systems• Enhanced productivity due toworkplace environment andemployment systems that are intune with the times

Enhance productivity by promoting
work style reforms(8) Social
contribution
initiatives• Dilution of reason for existence
due to reduced contribution to
local communities• Promote improved assessment of
the Company and increased
employee motivation throughencouragement of cooperative
activities

Promote communication with local
communities(9) Supply chain
management• Negative impact of inadequate
response to environmental andhuman rights issues by business
partners• Raise level of mutual sustainability
through synergies with business
partners

Strengthen cooperation withbusiness partners throughpartnership system(10) Strengtheningof corporate
governance• Continued existence of company
endangered by governance
failures(11) Risk
management
and compliance• Trouble caused by inadequate
response to risks• Fines and administrative
punishment caused by inadequate
response to laws and regulations
and the demands of society• Maintain normal corporate activities
by taking the initiative in responding
and gain the trust of stakeholders(12) Stable supply ofhigh-quality
products• Diminished trust due to productliability damages and theoccurrence of recall expenses• Enhance trust among customers
through consistent supply ofhigh-quality products

Thorough quality management andquality improvements(13) Stakeholder
communication• Declines in share prices, hiring,and shares due to diminishedtrust• Gain the trust of stakeholders by
improving understanding of theCompany

Enhance dialogue
Promote disclosure of information• Gain trust of stakeholders throughsound governance

Recruit and develop diverse
personnel
Build a workplace environment that
fosters sense of job satisfaction

Reinforce structures such as Boardof Directors, committees
Promote various corporate
governance initiatives
Identifying risks and addressing key
risks

Promotion of thorough compliance

DAIDO STEEL GROUP INTEGRATED REPORT 2023

64

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Progress of Actions for SDGs and Materiality
No.

Materiality

2023 Medium-Term or Long-Term Targets/KPIs

FY2022 Results and Current Initiatives

Reference Pages

Related SDGs

1. Preservation of the global environment (business activities)

(1)

(2)

Initiatives to address climate change

Reduce CO2 emissions through theuse of energy-saving measures,decarbonized electricity sources, anddecarbonization technology• Promote “Daido Carbon Neutral Challenge”
Reduce FY2030 emissions by 50% (compared to FY2013)
Achieve carbon neutrality by 2050

• Reduced CO2 emissions by 21% (compared to FY2013) (CO2 emissions factor: -26%)

P67-70Recycle scrap through use of electric• Promote recycling of main raw materials
arc furnaces• 90% recycling rate for scrap products

Strengthen “3Rs” for by-products• Promote recycling of by-products (slag, dust, sludge, etc.)• 80% recycling rate for by-products

Conservation of water resources• Promote recycling of water resources• Thoroughly manage and reduce emissions of chemical substances• Recycling rate of over 90% for water• Met all water discharge standards for all 41 managed items (Chita Plant, annual measurement)• Develop and provide products to support CASE

• Available for volume production: steel for e-Axle gears, semiconductor manufacturing equipment materials, soft magnetic materials, highperformance magnets, etc.
• Under development: electrodes for CO2 recovery, materials for lithium-ion battery (LiB) anodes, specially-shaped and -oriented magnets, etc.

• Develop and provide parts and materials to support the diffusion of hydrogen and ammonia businesses• Installed equipment to evaluate hydrogen embrittlement and corrosion resistance

Supply materials, facilities andequipment with outstanding energy
efficiency• Develop and provide products to contribute to energy savings• Available for volume production: jet engine shaft for aircraft, special molds (hot stamp, gigapress), etc.
• Participating in planning green innovation fund projects and the Materials Open Platform for Permanent Magnet• Develop and provide facilities and equipment to contribute to energy savings•S elected for the fiscal 2022 revised budget, Advanced Energy Conservation Investment Promotion & Energy Demand Structure
Transformation Support Program as “advanced equipment and systems” (10 Daido Steel products)

Supply facilities and equipment tocontribute to waste reduction andproducts to contribute to securing
water resources• Develop and provide products to contribute to waste reduction and the effective utilization of water
resources• Available for volume production: Lead-free super free-cutting stainless steel for ballpoint pen tips, pump parts for desalination plants, etc.
• Under development: 3D manufacturing wires and powders, etc.

• Develop and provide facilities and equipment to contribute to waste reduction and the effective utilizationof water resources• Under development: “Demonstration of ultra-high temperature carbonization technology by adding value to sludge” selected for the FY2023
Breakthrough by Dynamic Approach in Sewage High Technology Project (B-DASH Project)• Firmly establish Daido Steel Group Human Rights Policy within Company, put in place systems andframeworks to expand activities• Established the human rights policy (February 2023), signed UNGC and joined GCNJ (July 2023)• Provided human rights education to all Company employees, delivered harassment education to a total of about 680 people (cumulative
FY2022 total for Daido Steel Group)

P75-76

Human
Promote key health and safety
1) Elimination of occupational accidents measures• Ratio of accidents requiring time off work: 0.20% or lower• Serious accidents: 0• Ratio of accidents requiring time off work: 0.30%• Serious accidents: 0

P77-78Human2) Promotion of health and productivity
management

Promote better health among
employees• Promotion of health and productivity management• Promote early discovery and treatment of poor health or mental illness, and raise health awareness• Findings rate of 55% or lower, 50% or higher of responses of “I work with mental and physical vitality”• 98.9% underwent thorough detailed examinations• Smoking rate of 26.7%• Findings rate of 70%, 35% of responses of “I work with mental and physical vitality”

P79-80Recruit and develop diverse personnel• Encouragement of active roles for women: raise retention rate (30%→80%) and ratio of female managers(double the 2022 rate in 2030 (2%→4%)) by providing career consultations and education such as
selective role model training, percentage of next-generation management (associate senior staff)
positions held by women 17%• Female employee retention rate of 88.9%• 15 female managers (2%) (May 2023), 9.4% of next-generation management (associate senior staff) positions (March 31, 2022)

Build a workplace environment that
fosters sense of job satisfaction• Job satisfaction awareness surveys and activities to foster job satisfaction• “Making a company that people look forward to working at every day” project ongoing since FY2021, office manager management training,
began 360 degree evaluations

Promotion of work style reforms• Use IT to create efficient work styles regardless of location or time

• Remote working ratio at head office departments: 46.9%

Communication with local communities• Engage in more intensive communication about the environment with local communities• Participated in the “Inochi wo Tsunagu PROJECT” in the Chita Peninsula Seaside Industrial zone
• Enhanced communication through opening of plant sites and support for cultural and sporting activities

Enhance absorption of CO2 throughactivities that preserve the naturalenvironment• Reduce CO2 through conservation of green spaces and greening activities• Surface area of plant green space: Daido non-consolidated 315,000 m2, Daido Steel Group 187,000 m2 (only plants subject to the Factory
Location Act)• Kutcharo Natural Forest Daido: surface area of green space 3,734,000 m2• Nagiso Daido Forest: surface area of green space 21,000 m2 (the area for which the Company is the “forest caretaker”)• Kisokoma Highlands: surface area of green space 1,431,000 m2, Happudaira, Gunma: 2,079,000 m2

Strengthen cooperation with business
partners through partnership system•C ollaborate on ESG issues throughout the entire supply chain:decarbonization, BCP, VA/VE, compliance• L aunched Daido Supplier Partnership system “DSP” (May 2022)• Held partner meetings (May 2022) to publicize system

P87-88

Reinforce structures such as Board of
Directors and committees and promotevarious corporate governance initiatives• Expedite decision-making, enhance corporate value over the medium- to long-term• Enhance effectiveness and transparency• Established Sustainability Committee (April 2022)• Established ESG Management Department (January 2023)

P93-98

Identifying risks and addressing key
risks• Evaluation of risks through periodic formulation and revision of risk map• Updated the risk map for the 2026 Medium-Term Management Plan (during FY2023)• Implemented third BCM training, held sixth Diado Steel Group CRM study sessions, subcomittee activities (a total of 13 times, attended by atotal of 104 companies)

Promotion of thorough compliance• Firmly establish compliance mindset in all employees• Established Daido Group’s Anti-Bribery Policy (June 2023)• Reformed Daido Steel Group Corporate Code of Ethics (August 2023)• Number of internal reports: 40 Note: All have been addressed

Transition to a circular economy

P71-72

2. Preservation of the global environment (product supply)

(3)

(4)

(5)

Technological innovation for energy
transition

Improvements in energy efficiency

Effective utilization of natural resources

Supply of products to address mobility
innovation and contribute to clean
energy business

P73

P74

P74

3. Responsibilities and contributions to society(6)

Respect for human rights

(7)
Human
3) Promotion of diversity

Human4) Work style reforms

(8)

(9)

Social contribution initiatives

Supply chain management

Human rights initiatives

P81-83P84

P85-86

4. Strengthening governance
(10)

(11)

65

Strengthening of corporate governanceRisk management and complianceP101-106(12)

Stable supply of high-quality products

Thorough quality management andquality improvements• Index of major quality incidents: 0• Index of major quality incidents: 0.11 (index of FY2022 results taking the actual results from 2006 as “1”)P107-108(13)

Stakeholder communication

Improved stakeholder engagement•E nhanced transmission of corporate information and promotion of communication with stakeholders• Conducted ESG briefings and events for individual investors (shareholders and investors)

P109-110DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

66

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Contribution to Realizing a
Green Society
Corporate Data

Innovation to Realize a
Green Society

Preservation of the Global Environment

Initiatives to Address Climate Change
Status of Daido Steel initiatives to reduce CO2 emissions and save energy
Status of initiatives to reduce CO2 emissions derived from energy use
With our electric arc furnace process, Daido Steel is an energyintensive business. We view reducing the CO2 emissions of ourenergy sources as an important sustainability issue and aremaking it our top priority.
By establishing the three reduction measures of achieving
drastic energy savings by combining existing technologies, using
decarbonized electricity sources and improving consistent yield,
the Company is promoting reductions in environmental impact,
CO2 emissions and energy consumption.

CO2 emissions and emissions factor
CO2 emissions (1,000 t-CO2/year)
CO2 emissions factor(kg-CO2/t-crude steel production)

724

803

1,289
1,044

787

752

711

Reduced CO2 emissions throughenergy-saving improvements,
increased purchase of CO2-freeelectricity, and decreased production●Work to increase heat retentionof steam pipes
The deterioration of steam pipe heatretention material and sheet metal overtime results in reduced heatretentiveness and increased risk of pipe
corrosion. By performing work toincrease heat retention in order tosuppress heat radiation, energy loss canbe controlled and the lifespan of thesteam pipe extended, steadily expanding
the scope of application.

689
717

1,194 1,208 1,261 1,269

712

598

Before Problems: reduced heat-retentiveness, pipe corrosion
Increase in(1) Rainwater heat radiated/dispersed

Sheet metal

Existing
heat-retention
material
Steam pipe
(cross-section)

Aging
deterioration

Radiated/
dispersed heat-50%

1,089 917 1,004824

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

2030

Ingress of rainwater to heat-retention material through sheet-metal pinholes
and gaps (1)↓Water would be stored inside heat-retention material (2)↓Deterioration of heat-retentiveness results in increased radiation anddispersion of heat and progressive corrosion of pipel (3)Heat-retentiveness restored

Heat-retention material dries

Pipe corrosion suppressed

performed step by step,
resulting in excess supply (a)• Workers cannot operate thecompressors, resulting inexcess supply (b)●Using ceramic fibers in heating furnace refractories
Daido Steel has more than 150 heating furnaces and heat
treatment furnaces. Upgrading these facilities to use ceramic
fiber, which has excellent insulating properties, results in better
heat retention and greatly reduces the amount of energy used.
We are steadily expanding investment in these upgrades,
starting with the heating furnaces, which consume large
quantities of fuel.
Example of use in forging heating furnace at Shibukawa Plant

compressors↓
Airflow

In order to reduce CO2 emissions by saving energy, Daido Steel is working on detailed measures to cut energy wastage and loss in eachprocess, as well as investing in improvements by developing oxygen combustion technology to raise heating efficiency, utilizing ceramic
fibers to enhance insulation in heating furnaces, and other measures. Grassroots activities also include improvements such as using
insulation materials to increase heat retention of steam pipes to cut heat loss through radiation and dispersion, and taking steps tocounter air leaks at plants.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Recovery process●Compressor upgrade and installation of compressor
quantity control
Image of control by installing compressor quantity control
The amount of compressed air usedvaries with the operational status at eachControl method before improvement ManualControl method after improvement Automatic
production site. We have installed screwtype compressors with inverter control• The load is adjusted by two• The compressor
Image of control
Image of control
reciprocating compressors
quantity controllerabbased on the signal from
responds to thecapable of handling minute fluctuations
Required
the pressure gauge
signal from theairflow• Workers operate the startup
pressure gauge andand compressor quantity controllers,(load of 100%) and
two inverter screw
suspension of the otheraircompressors
Requiredwhich reduce wasted operations by
seven compressors
adjust the airflow. It
airflow
also operates theenabling the automatic adjustment ofstartup and• Adjustment of reciprocatingsuspension of thecompressors can only becompressor startup and suspension.
other seven

Examples of CO2 emissions reductions by saving energy

67• Water-repellent, so prevents ingress of rainwater to existingheat-retention material• Readily permeable by steam, so water can be discharged from lower waterdrainage holes↑

https://www.daido.co.jp/common/pdf/pages/sustainability/data/co2_data.pdf (Japanese only)

Can preheat uniformly
without uneventemperatures with oxygen
diffusion combustion

Effects of aerogel insulation material

Process of deterioration↓
Airflow

Fiscal 2022 emissions results are subject to third-party verification

Oxygen Fuel

Discharge water
through drainage
holes in existingheat-retention
material

Addressed by fitting
aerogel insulation material
over existing heat-retention
material↑

CO2 emissions: calculated based on the CO2 emission factors provided by contracted
electric power companies for each fiscal year
Calculations are limited to Scope 1 + Scope 2 on a non-consolidated basis (derived from energy)Illustration of application in ladle preheating device used in the steelmaking
process(2) Stored water

Area of additional
insulation

598

522

●Oxygen combustion technology
Because oxygen combustion results in high flame temperatures
and the energy required to heat the combustion air can besaved, we are able to improve energy efficiency in temperature
ranges above 1,000°C, which are often used at Daido Steel.
In addition to the ladle preheating equipment used in thesteelmaking process, Daido Steel is expanding the application ofoxygen combustion to soaking furnaces and continuous castingtundish preheating equipment.

(3)
Corrosion

After Fixes: recovered heat-retentiveness, reduce pipe corrosion←Time→←Time→

Reducing CO2 through the use of decarbonized electric power sources
In order to decarbonize our sources of power, Daido Steel buys CO2-free electric power. In addition, we are promoting initiatives toreduce CO2 by installing solar power generation facilities as a way of introducing renewable energy.
●Utilizing CO2-free electric power and promoting morewidespread use in the regions
In fiscal 2021 the Company began
Renewable energy-derived
purchasing CO2-free electric powerelectric power(annual reduction of 50,000 t-CO2), andin fiscal 2022 this was expanded to anannual reduction of 100,000 t-CO2. In
addition to further expanding the amountDAIDO STEEL
purchased as we approach 2030, we
CHUBU Electric
will work in cooperation with Chubu
Power Miraiz
Electric Power Miraiz Co., Inc. to
Use ofencourage more widespread use ofrenewable energy
renewable energy in the regions.

Solar power generation

Wind power generation, etc.

●Introduction of renewable energy
The Company began deploying solar power generation facilities at its Shibukawa Plant, with operation beginning in September 2022.
Using ceramic fibers
in place of previous
unshaped refractories
and bricks

Addressing climate change●CDP climate change and water security
Following on from the Climate Change Questionnaire wecompleted in the preceding fiscal year, we first submitted a
response to the Water Security Questionnaire in fiscal 2022 andreceived a B score for both questionnaires. We are making
efforts to further disclose information.

●Participation in the GX League
To achieve a carbon-neutral society by 2050 and transform theentire socioeconomic system, led by the Ministry of Economy,
Trade and Industry and through the cooperation of government,
industry, and academia, we are participating in the GX League,
which started from this fiscal year.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

68

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Preservation of the Global Environment

Initiatives to Address Climate Change
Information disclosure based on the recommendations of the “Task Force on Climate-related
Financial Disclosures (TCFD)”
1) Governance●As an organization for investigating and deliberating basic policy, important matters, and risks and opportunities related to climatechange, the previous CSR Committee was reconstituted in April 2022 as the “Sustainability Committee.” This Committee is chaired by
the President & CEO, and matters deliberated and decided there are put on the agenda of the Board of Directors.
●Resolutions deliberated and passed by the Board of Directors are rolled out to individual business divisions, which reflect them in theirbusiness operations.

2) Strategy●With the objective of understanding the impact of risks andopportunities presented to the Company by climate change,
as well as considering the resilience of Daido Steel’s mediumto long-term strategy and the need for further measures, we
conducted a scenario analysis for the period 2030 to 2050.
For the purpose of this scenario analysis, we referred toclimate change scenarios from the International Energy Agency(IEA) and the Intergovernmental Panel on Climate Change(IPCC), namely their 1.5°C and 4°C scenarios.

●As a result of verifying countermeasures to these risks andopportunities, we concluded that it is possible to enhance
corporate value by developing and expanding sales of highperformance materials and innovative environmental
engineering products, based on the basic strategy of themedium-term management plan for addressing changes insociety as we approach decarbonization. Our assessment isthat the Daido Steel strategy is resilient.

3) Risk management●As a process for managing climate-related risks, climate-relatedrisks are analyzed, countermeasures are drafted and promoted,
and progress is managed through the Sustainability Committee.
●Details of matters analyzed and considered by the
Sustainability Committee reported to the Board of Directors,
and management of risks is integrated across the Company
as a whole.

4) Indicators and targets●In order to assess and manage the impact of climate-related
problems on management, Daido Steel has set reduction
targets using total emissions of greenhouse gases (CO2) as
indicator.
●The Daido Carbon Neutral Challenge was announced in April
2021. The Company is promoting activities to cut CO2
emissions with the objective of reducing 2030 CO2 emissions
by 50% over those of fiscal 2013, and of achieving carbon
neutrality in 2050.

Factor(Million t-CO2/year)

1.04

Reduced demand forengine/exhaust systemparts due to progressive
Progressive shift to electric shift to electric vehicles
vehiclesRising demand forhigh-performancematerials used in electricvehiclesStrengthening of various
Increase in electricity
regulations, including thosecosts due to use ofgoverning greenhouse gas
renewable energy
emissions
Increase in operating andprocurement costs

1.5°C

Introduction of carbon
pricing

Rising demand for scrap
raw materials

Diffusion of technology toaddress issues related tothe environment and newenergy4°C

69

Impact on Daido Steel
Risk⬇

Opportunity⬆

to be more or less flat until 2030, but from 2030 onward weassume a significant decline as a result of the progressive shift
to electric vehicles.
● Progressive shift to electric vehicles to result in rising demandfor high-performance materials.
Note: High-strength steel and magnetic materials used in e-Axle
components, battery materials, control system parts, etc.

Risk⬇

● Electricity costs to rise as a result of increases in the ratio of

Risk⬇

● Possibility of increases in operating costs and procurement

Rising demand forelectric arc furnacematerials

Opportunity⬆

Increase in scrap
procurement costs

Risk⬇

Rising demand forinnovative engineering toaddress environmental
issues●W e expect internal combustion engine vehicle-related demand

Opportunity⬆

renewable energy used.

costs for alloys and other materials.
● Due to intensifying demands for decarbonization and astrengthening trend toward low-emission products, we expect
rising demand for electric arc furnace materials due to theirrelatively low CO2 emissions.
● Rising demand globally for electric arc furnace materials, andrising demand for high-grade scrap.
● Could be affected by soaring prices and difficulties inprocurement as a result.
● As investments aimed at improving energy efficiency increase inpreparation for decarbonization, demand for our environmental
engineering will rise.

Countermeasures

Risk of operations being
Increasingly intense (acute) suspended due to natural
disasters on suppliers
climactic damage
and production sites

Opportunity
⬆

Risk
⬇

DAIDO STEEL GROUP INTEGRATED REPORT 2023

hydrogen embrittlement resistance steel, as a result of shift
toward hydrogen society.
Note: High-performance materials used in hydrogen stations,fuel cell vehicles, hydrogen internal combustion engines,
and other applications● Increasing risk of suppliers and main plants being struck bynatural disasters, leading to suspension of operations.

compared to FY2013

Toward 2050
Aim to achieve carbon neutrality
in line with the development of decarbonization technologies
and infrastructure

0.52

semiconductor-related products and clean energy to achievesustainable business growth

Scope 2: electricity(1,000 t-CO2/year)• Improve and minimize heat losses• High-efficiency combustion improvements• Introduce waste heat recovery technology

-50%

0.65

□ Expand sales in future growth markets such as CASE (automotive),

449

Challenge
towardcarbonneutrality(1,000 t-CO2/year)• Energy-saving/more efficient facilities• Use of renewable-energy electricity

595

-23%

367

352

457

-70%

344
295

□ Develop materials tailored to different product needs□ Increase production capacity in response to rising demand178□ Launch new businesses, and launch and enter the market for new

products aimed at next-generation vehicles

2013□ Absorb increases in electricity costs by saving energy and improving

product yields□ Introduce renewable energy within the Company itself

2022

2025

2030

2050

2013

2022

2025

2013

2030

2022

2025

2030

CO2 emissions are for Daido Steel Scope 1 + Scope 2 on a non-consolidated basis (derived from energy)
Emission factors for historical CO2 emissions (2013 and 2022) are calculated based on those provided by contracted electric power companies for each fiscal year

□ Invest in reducing CO2 emissions and move completely to renewableenergy for all electric power needs to offset cost burden□ Request that suppliers reduce their CO2 emissions

CO2 emissions by Scope 3 category (1,000 t-CO2/year)□ Actively expand sales of low-CO2 emissions specialty steel

Category

FY2022

1. Purchased products and services

1,136

manufactured in our innovative STARQ®
□ Move forward with the shift to renewable energy to promote further

differentiation□ Expand scrap recovery programs in cooperation with customers, andestablish technologies to enable the use of low-grade scrap in order
to control soaring prices and secure necessary scrap volumes□ Actively expand sales of Daido brand energy-saving products

Note: STARQ®, DINCS®, ModulTherm, Premium STC® Furnace, etc.
□ Promote the development of engineering products (hydrogen-fueledindustrial furnaces, etc.) that match customer needs● Rising demand for high-performance materials, such as

Rising demand forhydrogen-related
technology and products

Reduce CO2 emissions by 50%

Scope 1: fuel• Energy-saving improvements -13%
• Use of renewable-energy electricity -37%

0.82
ChangeToward 2030

2030 targets for reductions in CO2 emissions

TCFD scenario analysis
Scenario●We conducted scenario analyses on climate-related risks,
centered on the ESG Promotion and Oversight Division. Aftertaking into account Daido Steel’s business strategy,
considering the likelihood of each risk and opportunity occurringand their impact in the event that they do occur, and prioritizing
climate-related risks, we will focus on countermeasures toaddress those items with the highest impact.

□ Develop materials tailored to different product needs□ Acquire new customers and open up new markets□ Promote BCP measure such as risk management in cooperation with

suppliers and ensuring an appropriate level of inventory□ Continue to implement flood countermeasures for main plants

Calculated by multiplying the purchase price and purchase weight of raw materials and materials by the CO2 emissions factor

2. Capital goods41

3. Fuel and energy-related activities not included in Scope 1 or 2

191

Calculated by multiplying purchased electricity and fuel by CO2 emissions factor

4. Transportation and delivery (upstream)

56

Calculated by multiplying the amount of fuel used and the amount purchased under Category 1, as reported under the Act on
Rationalizing Energy Use, by CO2 emissions factor

5. Waste generated in operations

17

Calculated by multiplying the waste and recycling amount for each type of by-product by the CO2 emissions factor

6. Business travel2

Calculated by multiplying the money spent on each mode of transportation by the CO2 emissions factor

7. Employee commuting

3

Calculated by multiplying the money spent on each mode of transportation by the CO2 emissions factor

13. Leased assets (downstream)5

Calculated by multiplying the leased surface area by the CO2 emissions factor

Total

Calculated by multiplying capital investments by CO2 emissions factor

1,451

Calculations are limited to categories applicable to Daido Steel on a non-consolidated basis
Calculation method: IDEA LCI database Ver. 3.3 (April 15, 2023) used by IDEA Lab of AIST Research Institute of Science for Safety and Sustainability, and theemission factor database for corporate GHG emissions accounting over the supply chain (Ver. 3.3) used by the Ministry of the Environment

Fiscal 2022 emissions results are subject to third-party verification

https://www.daido.co.jp/common/pdf/pages/sustainability/data/co2_data.pdf (Japanese only)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

70

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Contribution to Realizing a
Green Society
Corporate Data

Innovation to Realize a
Green Society

Preservation of the Global Environment

Transition to a Circular Economy

Strengthen the 3Rs (Reduce, Reuse, Recycle) for by-products
Specialty steel manufacturing generates slag, dust, scale, and other by-products. At Daido Steel, we use our proprietary technology in aneffort to promote and strengthen the 3Rs and minimize the amount of waste.

Specialty steel: The ultimate sustainable material
essential.
In order for us to enjoy the benefits of iron in perpetuity, it isimportant that scrap iron be reborn as various specialty steel
products through electric arc furnace processes andcontinuously supplied to society.

The mass-production and mass-consumption economy is thecause of a variety of environmental issues, including the depletionof natural resources and the destruction of biodiversity.
Transitioning to a circular economy that will reuse resources in aform that will allow the realization of a sustainable society is

End products enhance
improved environmental
friendliness in a variety
of daily scenarios

Scrap iron

Recycling example from electric arc furnace slag

Recycling example from electric arc furnace dust

Slag generated at the Chita Plant is mainly recycled as steel slag
for roads, which is roadbed material or aggregate for asphalt
concrete, helping to reduce the mining of crushed stone, which
is a natural resource.

Electric arc furnace dust generated at the Chita Plant undergoes
melt processing at Daido Steel’s proprietary recycling facilities.
This is converted to zinc raw material by concentrating the zinc,of which approximately 20% is contained in electric arc furnace
dust, thereby contributing to the circulation of zinc, which is anatural resource.

By-product recycling rate and landfill disposal

Inspection(10,000 tons)

Electric arc furnace breathes
new life into scrap iron

75.6

81.8

79.7
80

18
12

60

Reborn as highly individual
specialty steel products

Ship

Examination

0

Recycling at Daido Steel

7.6

5.5

2018

Other 4.0%

Brick
2.5%

Other
10.0%

Dust
6.5%

Brick
11.8%

2019

7.5
20

2020

2021

2022

(FY)

FY2022

294,000 tons/year

40

8.7

6

Byproduct
recyclingRoll

Daido Steelproducts

Sludge 2.5%

FY2022

11.7

Harden
Forge

Scale
27.2%

75,000 tons/year

Sludge14.3%

Excludingin-house scrap

0Excludingin-house scrap

Dust
18.3%

Slag
57.3%

Slag
45.5%

Effective utilization of water resources

90% of the raw materials used in Daido Steel’s production
systems consists of recycled products, mainly scrap iron. Byutilizing every last piece of iron, we will shift to a closed-loopsystem for iron sources.
The main types of scrap iron are market scrap produced whenstructures and vehicles are dismantled, process scrap originatingfrom production sites that manufacture a variety of machinery,

and in-house scrap originating from steelmakers. The electric arc
furnace processes that bring these various resources back to life
as new products are, in a manner of speaking, the recycling
processes that drive the circulation of iron resources. In addition,
we proactively utilize recycled electrical wires and aluminumdross, RDF and RPF and so on as secondary raw materials.

Purchased scrap ironScrap ironAlloy1,654,000 tons

73,000 tons

Secondary raw
materials/materials

107,000 tons

In-house scrap iron90%

(converted to crude oil)

1.46 billion kWh

174,000 kl

RollingIndustrial water

22,670,000 m

232,000 tons
[Strengthen “3Rs” forby-products]

By-products 370,000 tons
Slag, dust, scale, sludge, bricks

By-product recycling rate
80%

Slag products, zinc raw materials,
raw materials for refractories, backfill materials, etc.

824,000

CO2 emissions per ton

Final waste
disposalApprox. 0.67 tons
per ton of products

Specialty steel products 1,231,000 tons

Market-generated scrap

Wastewater

23,960,000 m

3

Approx. 19 tons
per ton of
products

3,000

2,339
Steel strip
plant

Forging plant

2,410
2,262

2,000

Steelmaking plant[Effective utilizationof water resources]

CO2 emissions■ Water drawn volume ■ Waste water volume(10,000 m3)

2,408

Water recyclingrate
90% or more

Maintenance/
inspection<Reference> Initiatives to prevent leakages of abnormal water
Daido Steel uses a variety of chemical substances, such asacids and alkalis. We perceive outflows of such substances from
Daido Steel sites as a result of localized torrential rain and floods
to be one of the water risks that we face. In order to mitigate thiswater risk, we have established a working group within the
Company, which is promoting improvements to facilities andother initiatives.

3

About 2%
evaporates

Approx. 0.30 tons per ton of products

In-house scrap iron

Large volumes of water are used as a coolant in specialty steel
processes, which involve materials at high temperatures. For
indirect cooling water for facilities, whose temperature has risen
due to having been exposed to high temperatures, by processing
the used water appropriately, such as cooling down throughpermanent cooling towers, reusing it repeatedly, and minimizing
discharges outside the plant, we have achieved a water recycling
rate of more than 90%. Daido Steel started submitting responses
to CDP questionnaires in fiscal 2022. Going forward, we will
actively be working on water-related issues.

City gas, etc.

Quicklime, fluorite, reducingslag, bricks, electrodes, etc.

Steelmaking[Closed loop of iron sources]

FuelElectric power

Rate of recycling
among raw materials

Output78.2

83.9

Breakdown of unused by-products

(%)

100

Melt

Smelt

Input

Recycling rate

Landfill volume

30
24

Final
product

Breakdown of effectively utilized byproducts

2,514

2,351
2,285

2,181

2,396
2,267

Purified in wastewater
treatment facility

Partly reused

1,000

Forging
plant

Note:
Includes rain waterSpecialty steel products, electronic components,
automotive components, and industrial machinery

Aichi
irrigation
water

Wire rodrolling plant

Small-size
rolling plant

Large-size
blooming plant

About 5%discharged
into the ocean

0

2018

2019

2020

2021

2022

(FY)

Note: Waste water volume includes rain water

End product manufacturing/use in society

Notes: 1. Results for FY2022 (non-consolidated)
2. CO2: Energy used in plants (Scope 1 + Scope 2) converted to CO2 emissions per ton (using the conversion factors of the respective electric power companies)

71

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

72

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Preservation of the Global Environment

Helping to Protect the Global Environment with Daido
Steel’s High-performance Products and Technology

Products and technology that contribute to improvements in energy efficiency
Category*

Products that support technological innovation for energy transition

Category*

Business
division

Product
Gear steel

Steel/toolsteel

e-Axle gear reducers

Some volume production扌扌Some volume production

扌扌Steel for hydrogen resistanceIn hydrogen environments

Realization of a hydrogen society

Volume production

扌扌Steel for wind power generation(TPG-accredited)Wind power generation gear
reducers

Expansion of clean energy through steady
operation of wind power generation

Volume production扌

CLEANSTAR®

Semiconductor manufacturing
Improvement of semiconductor performanceequipment

Volume production

扌Soft magnetic materials (strip)
Permalloy
Resistance materials (strip)

High-performance SUS (strip),high-nickel materials (strip)

Current sensors

Extension of EV range through improved
precision of detection

Volume production扌扌Current sensors

Extension of EV range through improved
precision of detection

Some volume production

扌扌xEV, motor cores for drones

Extension of range through reduced size andweight of motors

Under development

SOFC/SOEC

Reduction of CO2 emissions through methanation Under development

Functional
products

Fabricatedmaterials

S
Under development

Parts for converters

Improvement of xEV efficiency

Volume production扌扌Improvement of mold life by achieving
water-cooling holes in complex shapes

Volume production扌扌High-performance powder for LiB

LiB for automotive/consumer
batteries

Extension of EV range

Under development

Commercialization in 2026

Soft magnetic powder

Reactors, etc.

Reduction of size and improvement of efficiency
of HEV systems

Volume production

扌

Target material STARMESH®-γ1

Touch panel (blackening layer) Improvement of communication efficiency

Volume production

Commercialization in 2023

Materials for hydrogen resistance

Liquid hydrogen pumps,
valves, etc.

Realization of a hydrogen society

Some volume production From 2026

Materials for geothermal power
generation

Next-generation geothermal
power generation

Expansion of clean energy by steady operationof geothermal power generation

Under development

Promotion of power generation with a low
amount of CO2 emissions

Some volume production

Improvement of resource drilling efficiency

Under development

Category*P

Commercialization in 2024

eVTOL motors

Reduction of CO2 emissions from mobility

Under development

Commercialization in 2026

Specially-shaped and -oriented
magnets (neodymium magnets)

Motors, sensors

Extension of EV range, conservation of heavy
rare-earth elements

Under development

Commercialization in 2026

PLP (Press Less Process)High-performance magnets(neodymium magnets)

Motors, sensors

Extension of EV range, reduction of motor size

Volume production

扌扌

SmFeN magnets

MotorsReduction of industrial equipment motor size

Under development

扌扌Improvement in fuel consumption throughreduced size and weight

Some volume production扌Microalloyed steel for cold heading Automobile

Reduction of CO2 emissions by omitting heat
treatment

Some volume production

扌扌Steel for high-efficiency engines

Automobile

Improvement of fuel consumption

Volume production➡

Hot stamp molds RDH395 andRDH406

Hot stamp mold materials

Improvement of productivity through improved
wear resistance and thermal conductivity(improved lifespan)

Volume production扌扌

Gigapress molds RDH462 andRDH472Extra-large die-cast moldmaterials

Improvement of productivity by ensuring
toughness in large molds (improved lifespan)

Development completedCommercialization in 2023

High-performance die-cast mold
RDH450Die-cast mold materials

Reduction of repair frequency and improvementof yield rate through improved heat checkresistance

Under development

Commercialization in 2024

STARPAS® (foil tape)

Magnetic shield sheet

Reduction of operation loss of electronicequipment

Volume production

扌扌

Target material high purity Ni

Power semiconductor backelectrode

Improvement of electricity consumption throughpower semiconductor installation

Volume production扌扌LTX 420 3D powder for plastic
molds

3D powder for plastic molds

Improvement of productivity and quality of resin
parts in very large molds

Volume production

Commercialization in 2023

Fe-Si spherical fine powder

Rectifier circuit parts

Reduction of loss through power semiconductor Under development

Commercialization in 2026

Aircraft jet engine shaft

Jet engines

Energy-saving through improved engine
efficiency

Volume production

扌Engine valves for ships

Diesel engines for ships

Supports high-temperature combustion
according to environmental regulations

Volume production扌Electric arc furnaces with rotating
drives (STARQ®)

Melting furnace for steel
materials

Energy-saving through uniform scrap-melting
technology

Volume production扌Electric arc furnace equipped withscrap preheater in movable
furnace top

Melting furnace for steel
materials

Energy-saving through direct effective use ofwaste heat

Volume production扌Annealing furnace for
automotive components, etc.

Reduction of CO2 emissions through advancedenergy-saving technology

Volume production

扌扌

DINCS® (high-efficiency
combustion system)

Energy-saving equipment forheat treatment furnaces

Energy-saving through effective use of
combustion waste heat

Volume production扌扌

ModulTherm

Vacuum carburizing furnace for Reduction of CO2 emissions through our
automotive components, etc.
proprietary vacuum carburizing technology

Volume production扌

SyncroTherm®

Vacuum carburizing furnace for Reduction of CO2 emissions through our
automotive components, etc.
proprietary vacuum carburizing technology

Volume production扌

Automobile

Products and technology that contribute to effective utilization of resources

Commercialization in 2025扌扌

Expected sales* (2030)®

Applications

Contribution to protecting the global
environment

StatusPremium STC® Furnace (2ndMachinery generation)

From 2026

Materials for eVTOL devices

DAIDO STEEL GROUP INTEGRATED REPORT 2023

P

From 2026

CO2 recovery devices

Fe-Si spherical powder

Steel/toolsteelCommercialization in 2026

Reduction of CO2 emissions, expansion of clean
energyHighly corrosion-resistant drill collars Oil and gas drilling73

Expected sales* (2030)

BEV=Expansion of zero-CO2 emissions

FabricatedMaterials for nuclear power/nuclear Light water reactors, nuclear
materials
fusion reactors
fusion reactors

Magnets

BEV=Expansion of zero-CO2 emissions

Statuse-Axle gear reducers

HTC® and LTX® 3D printer powder Molds for die-castingP

Contribution to protecting the global
environment

Steel for motor shaftsMaterials for motor cores (strip)

Functional
products

Applications

Category) P: CN products S: CN solutions
Expected sales) F Y2030 sales plan and expectations compared with FY2022 is
扌扌: Double or more 扌: Increase of double or less ➡: No change

Product
Steel for high-strength springs

As our carbon-neutral strategy, Daido Steel continues to help establish energy transition technology, improve energy
efficiency, and effectively utilize resources, and to contribute to the realization of a green society by developing and supplying“a variety of innovative products that support mobility innovation and energy transition (CN products)” and “energy-saving
technology and facilities that combine engineering design and our own operational know-how (CN solutions).”* Legend

Business
division

Business
division

Steel/toolsteel

Product

Contribution to protecting the global
environment

StatusExpected sales* (2030)

Lead-free super free-cutting
stainless steel

Ballpoint pen tips

Does not use regulated chemical elements

Volume production扌

DHW® 3D manufacturing wires

Molds

Extension of lifespanUnder development

Commercialization in 2024

G-coat 3D manufacturing wires,nickel-based, etc.

Aircraft and equipment for use
in space development

Reduction of raw materials

Under development

Commercialization in 2024

Low slag welding wire

Automobile undercarriages

Reduction of raw materials through thinning

Under development

Commercialization in 2024

Desalination plant

Promotion of development of water resources

Volume production

扌

Recycling of sewage sludge

Utilization as an alternative to activated carbon
or as soil conditioner

Under development

Volume reduction and utilization in roadbed
material, etc.

Volume production

扌Circulation of zinc, conversion of molten slag
into resources

Volume production

扌®

FabricatedPump shaft
materials
Next-generation sewage sludge
carbonization system (ultra-hightemperature carbonizing furnace)
S

Applications

Machinery Incinerated refuse ash-melting and Recycling of trash incineration
recycling furnace (DAP®)ash
Daido Special Recycling Process
for Dust and Slag Melting (DSM)

Recycling of electric arc
furnace dust

From 2026

DAIDO STEEL GROUP INTEGRATED REPORT 2023

74

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Contribution to Realizing a
Green Society
Corporate Data

Innovation to Realize a
Green Society

Responsibilities and Contributions to Society

Respect for Human Rights

Implementation of education on human rights

Formulation of human rights policy
Steel Group Management Philosophy is put into practice and afuture society in which people can live prosperously is realized.
We will furthermore contribute to the realization of a society freefrom human rights violations and discrimination by respecting theindividuality and diversity of all people and promoting the creationof workplace environments where everyone can work
enthusiastically.

In February 2023, the Company formulated the Daido SteelGroup Human Rights Policy based on the Daido Steel GroupManagement Philosophy, Corporate Code of Ethics, and the
Basic Policy on Sustainability.
We understand the necessity to respect the human rights of all
those affected by the Group’s business activities and arecommitted to respecting human rights to ensure that the Daido

Provisions of the Daido Steel Group Human Rights Policy (excerpt)
1. Basis for respecting human rights andpriority issues
2. Scope

3. Education
4. Implementation of human rights due
diligence

5. Remedy
6. Consultation and dialogue with stakeholders

The full text of the Daido Steel Group Human Rights Policy is available on our website.

Daido Steel Group Human Rights Policy Priority Issues
The following key challenges pertaining to human rights have been set out in the Daido Steel Group Human Rights Policy Priority Issues in
the promotion of initiatives to respect human rights based on the human rights policy.

We will respect the individuality and diversity of all
people and promote the creation of a workplacethat motivates employees. In addition, as part ofour efforts to create a positive work environment,
we will strive to employ local people and support
the resolution of labor issues in local communities,
including employing socially vulnerable people.

1

We respect diversity and do not discriminate on any basisof race, ethnicity, place of birth, color, religion, gender,
age, creed, social status, illness, disability, sexual
orientation, gender identity, marital marriage, or thepresence or absence of children.

In all countries and regions
where we operate, we
prohibit and do not use
forced or involuntary labor.
In addition, we respectchildren's rights and prohibit
the labor and employmentof persons under the legal
minimum working age ineach country or region, anddo not use them.

75

2Prohibition ofharassment

Daido Steel Group
Human Rights Policy
Priority Issues

4
Prohibition offorced laborand child labor

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Forthcoming initiatives
We will implement workplace questionnaires for Daido Steelemployees regarding human rights, as a means to investigate therealities of negative impacts as part of our human rights due
diligence (HRDD). The Company subsequently intends to seek to
identify and evaluate negative impacts and consider appropriate
corrective and preventive measures using a risk-based approach.
We will continue to actively implement and promote thesemeasures in fiscal 2024 and onwards.
Each Daido Steel Group company also works together with us
to promote education for officers/employees and human rights
due diligence, in addition to issuing notifications on the humanrights policy. We will continue to provide the necessary support
to ensure that initiatives for the respect of human rights arethoroughly implemented in cooperation with other Group
companies.
In addition, we disseminate and provide explanations of theCompany’s human rights policy to suppliers, and have also
initiated a survey questionnaire on human rights. Going forward,
we will continue to actively encourage our business partners toachieve an understanding of and cooperate with our humanrights policy.

We are meanwhile also currently taking steps to put in place
the infrastructure for remedial measures such as those designed
to improve our hotline system and to facilitate our becoming
members of outside platforms.
Roadmap
FY2023

Action1Q

2Q

3Q

FY2024
4Q

1Q

2Q

3Q

4Q

Human rights education
Workplace questionnaires
Identification and evaluationof negative impacts
Implementation of corrective
and preventive measures
Supply chain management

Implementation for identified negative impacts(as and when the needs of a case dictate)
Implementationofquestionnaires

Feedback

Questionnaires

Feedback

Monitoring
Hotline improvement
Consider participation in
outside organizations

Improvement activities as and when required
Consideration ofoutside organizations

Examples of responses to priority issues—Harassment elimination activities

Elimination of
discrimination

5
Creation of
motivating work
environment

Daido Steel Group Human Rights Policy educational materials

Enhancement and revision of HRDD Remedy

https://www.daido.co.jp/en/common/pdf/pages/sustainability/policy_human.pdf

The Company conducted human rights education for officers and all employees from April to
September 2023. We will acquire the necessary knowledge of international norms and global trends
pertaining to “business and human rights” and deepen our understanding of the Daido Steel Group
Human Rights Policy to promote initiatives for the integral respect of human rights by the Group as awhole. In addition, we are implementing awareness-raising activities through the inclusion of notices ininternal newsletters.

3
Respect theright to work

We do not condone
sexual harassment, power
harassment, or any otherharassment that infringes
on human rights on thebasis of gender orposition.
(Examples: power
harassment, sexual
harassment, etc.)

In all countries and regions where we
operate we will comply with labor,
health and safety laws and regulations
concerning prevention of overwork
and minimum wage guarantee,
respect freedom of association andthe right to collective bargaining, andstrive to secure stable employment by
establishing healthy labor-management relationship and resolving issues
through sincere and active dialogue
with employees.

Activities to eliminate harassment were commenced from fiscal
2020. We implemented in-person, e-learning, and remoteharassment education for division heads, with 160 participants infiscal 2022.
Going forward, we will actively implement awareness-raising
activities for employees other than division heads as well as
follow-up for those who have already taken courses, particularly

aimed at steadily promoting the priority issues of “prohibition ofharassment” and “creation of motivating work environment.”
The Daido Steel Group also recognizes harassment as aproblem concerning the entire Group, and supports awarenessraising activities and education for Group companies. In fiscal
2022, in-person education was conducted for 521 people fromfour Group companies.

UNGC signatory and GCNJ membership
In July 2023, we signed up to and endorsed the United Nations
Global Compact (UNGC), a global initiative advocated by theUnited Nations to realize sustainable growth, while also becoming
a member of the Global Compact Network Japan (GCNJ), an
organization that carries out the UNGC’s principles and mission
in Japan.
The UNGC is the world’s largest sustainability initiative, as partof which the United Nations and the private sector (companies
and organizations) join forces to build a healthy and robust global

society.
The Daido Steel Group endorses theten principles in the four areas of Human
Rights, Labour, Environment, andAnti-Corruption advocated by the
UNGC, and will actively promote
initiatives towards their realization.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

76

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Responsibilities and Contributions to Society

Elimination of Occupational Accidents

Safety performance

Basic approach
No management results can make up for occupational accidents.
“Safety and health are the source of happiness,” and “thefoundation of corporate management.” Based on the principle of“Safety takes precedence over everything,” we establish working

environments enabling everyone working in the Group, including
elderly and women, to work safely with peace of mind andconduct activities to eliminate occupational accidents.

Safety Management Policy and targets
Company-wide Safety Management Policy

3. C reation of systems for risk identification ...Risk assessment promotion 3-year plan, essential
improvement of facilities, risk-sharing/reduction
4. Strengthening of construction management

Serious accidents: zero
Ratio of lost-timework injuries: ≦ 0.2

Safety management organization
We have established a safety management system headed by
the President, with safety messages from the President
disseminated throughout the Company. In addition, the Safety
and Health Committee and labor and management are working
as one to monitor and appropriately handle actual safety

Drafting of company-wide Safety
Management Policy

President & CEO
Management
Meeting

Safety promoter

Safety and HealthCommittee

Ratio of lost-time=work injuries

Number of casualties stemmingfrom lost-time work injuries
Total actual labor time

All industries
Manufacturingindustry
JISF
Daido Steel Affiliates
Daido Steel1 million hours

2.5
2.0

1.90

1.5
1.0
0.5
0.0

1.02

1.75
1.12
0.29

0.51
0.30

0.00

2006

2008

1.61

1.59

1.66

1.63

0.98

1.00

1.06

1.15

0.50

0.46

0.53

1.83

1.95

2.06

1.20

1.21

1.25

0.55

0.52

0.50

0.08

0.15

0.07

0.29

0.34

0.33

0.24

2010

2012

2014

2016

2018

2020

2022

0.30

(Year)

Following the drafting and approval of company-wide policy,
annual plans are drafted at each plant, with reports on progressand results shared through monthly safety patrols of each plantand in regular meetings such as the company-wide Safety and
Health Committee and the company-wide Plant Manager Meeting.
Audit & Supervisory Committee members and Company officers
also attend important meetings to work toward achieving thoroughsafety management at each plant at the management level.
Furthermore, Team Leaders Meetings are held four times ayear for the purpose of sharing information on a workplace levelwith each safety management department and to ensure shared
mindsets regarding safety activities. We are meanwhile also
striving to establish detailed understandings of workplaces bymeans of individual interviews in an effort to prevent accidents.
Safety study sessions with affiliates, at which topics fordiscussion are brought up, are held several times a year, withproblems and safety challenges as part of work processes
shared and countermeasures discussed.
With regard to overseas plants, we plan to establish sharedactivities themes and implement on-site communication on safety.

Education system for improving safety sensitivity
conditions.
Information is also shared across the Group through safety
meetings with Group companies, with the Daido Steel Group
continuing to work as a unified whole.

Board of Directors

Safety manager

Ratio of lost-time work injuries

Status of specific activities

Targets

1. R ebuilding a safety education system within the workplace …Enhancement of safety sensitivity
through small group activity
2. S afety education providing an understanding of the hazards in the workplace …Promotion of steady
OJT in the workplace

The rate of lost-time work injuries in the manufacturing industry is
lower than the average level for all industries, and the steel
industry is particularly low.
Nevertheless, in 2022, following a major deterioration in the
Company’s performance in recent years, in addition to
implementing “workplace safety education and securing of aframework for activity” and “safety education for understanding
hazards in the workplace” to heighten safety sensitivity especiallyamong early career employees, we initiated a 3-year plan for
promotion of risk assessment as “the creation of a framework for
identifying risks,” and are currently promoting risk sharing.

●Safety Evangelist activities
Safety trainers/leaders (74 Safety Evangelists companywide) are
assigned to each workplace. Safety Evangelists are personnel
who are well-versed in generaltasks as well as hazards and risks
within the workplace, and provide
on-site, in-situ, and timely guidance
to employees to improve their
sensitivity to danger.

●3-year plan for promotion of risk assessment
In 2022, our main focus ofinitiatives was education.
In 2023, activities arefocused on identifying andsharing risks at each
workplace.

Legal compliance/creation of safety management system
Sustainability Committee

Labor union

Officer in charge of Innovative Safety and Health Department●Risk assessment of chemical substances
We are rolling out information sharing and educational activities
alongside each plant toward the achievement of theirautonomous management.

●Creation of safety management system
We are focusing our efforts on infrastructure building toward theoperation of the OSHMS*.
* Occupational safety and health management system

Collaboration

Essential improvement of facilities safety
Execute initiatives at each plant based on policies of safety management

Safety Management
Specialized Department

System Development Section/Equipment Development Section,
Innovative Safety and Health Department

Safety promotion management departments at each plant

Manufacturing sites at each plant (Safety Evangelists)

77

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Affiliates
Provide information●Reduction of risks during slinging operations when operating cranes
We are making efforts to reduce the risks associated withslinging operations by cranes, where the chance of a serious
accident occurring is particularly high.
[Overview of improvements]
There are inevitable difficulties involved in placing oneself at a
distance from a suspended load during removal of a sling
suspension from a crane hook.
We developed a device for automated opening and closing of
the hooks to reduce the risk of operations involving the inability tomove away from a hazard source.

1
Hookcloses when
the bag
is lifted2
Hookopens when
the bag
is lowered

DAIDO STEEL GROUP INTEGRATED REPORT 2023

78

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Responsibilities and Contributions to Society

Promotion of Health and Productivity Management

Health and productivity management strategies map and KPIs®

Based on the “four pillars” we have formulated strategies for improving well-being and are promoting measures toward the achievement ofa Daido Steel where employees work with vigor and motivation.

Basic approach
We will proclaim our commitment to building a company where employees work with vigor and motivation based on an awareness in our
Health and Productivity Management Declaration that “safety and health are the source of happiness,” and that “human resources are themost valuable of a company’s resources,” seeking to increase the number of employees working enthusiastically and determinedly while
actively pursuing increased productivity and the creation of corporate value for the organization as a whole through health and productivity
management.

[Action points][Expected effects/improvements (results confirmed using responses tohealth examination questionnaires and health examination results)]

Board of Directors(1) Analyze workplace health(2) Bolster education(3) Undertake activities to enliven the workplace
Disease prevention

Physical(1) Post-health examination measures(2) Bolster lineup of education and events
Prevention of passive smoking(1) Establish smoke-free environments(2) Subsidize smoking cessation programs

Propose company-wide policies forcreating healthy habits

Safety Manager

KPI items
Employee awareness andbehavioral modification

Under a system with the President as its head, Health and Productivity Management Promoter and the Health Management Specialized
Department formulate a company-wide policy, and in coordination with the health insurance association and labor union, implement
measures at each plant and share information with Group companies.

(2) There is a higher incidence rate on statutory items
than nationwide values(1) An increase in the proportion of those able to perform their work duties in a state of full mental and physical vitality (2) Reduce incidence rates
Actual value of 70% → Target of 55% or lower
Actual value of 35% → Target of 50% or greater

KPI

MentalHealth and productivity management organization

Increased number of employees
capable of undertaking their workduties in a state of mental andphysical vitality

50% target
Reductions in incidence rates

55% target[Achievement vision]

Improved
work engagement*1

Realization of a Daido Steelwhere employees work withvigor and motivation

Reduction of losses
occasioned
by presenteeism*2

Sustainable growth of
the Company throughcreation of corporate value*1 Work engagement:
A psychological state of fulfillment in terms of vitality,
enthusiasm, and immersion in work
*2 Presenteeism:
Low efficiency in performance of work duties fromcontinuing to work due to health problems

Reduction of losses
occasioned
by absenteeism*3*3 Absenteeism:
Lost work hours or absence from work due to illness or injury

President & CEO
Management
Meeting

Safety and HealthCommittee

Sustainability Committee

Affiliates
Provide information

Health and Productivity
Management Promoter

Challenges identified from (1) Those who lack mental and physical vitality are more likely to experience challenges
the fiscal 2022 analysis
in their workplace environments and to suffer from non-specific complaints

Officer in charge of Innovative Safety and Health Department
Collaboration

Daido Steel
Health Insurance
Association
Labor union

Execute initiatives at each plant based on policies for healthy habits

Health Management Health Improvement Section, Innovative Safety and Health Department(industrial doctors, public health nurses, health keepers)
Specialized Department

Collaboration

KPI trends
Incidence rates

Percentage of employees possessed ofmental and physical vitality

(%)

74

74

76

77

79
70

55
50

Promote employee
awareness andbehavioral
modificationand improve KPI
achievement rate

50
37

35

2017 2018 2019 2020 2021 2022

Target values

FY2021
performance

FY2022
performance

Ratio of those undergoing health examinations

100.0%

100.0%

Ratio of those undertaking stress check-ups

99.9%

99.8%

Ratio of persons with high levels of stress

7.7%

7.4%

Ratio of persons well rested from getting a sufficient amount of sleep

74.6%

72.1%

Ratio of smokers

26.9%

26.7%

Ratio of persons eligible for specific health guidance

18.6%

18.8%

Ratio of repeat examination uptake by persons requiring detailed examinations

98.2%

98.9%

Health promotion management departments at each plant

Outcomes of health-related initiatives
Medium- to long-term health and productivity management policy: “Four pillars”
The Company has positioned “four pillars” as part of its medium- to long-term health and productivity management policy, indicating its
behavioral targets for employees by respective pillar.

MentalInfectious
diseaseprevention
Diseaseprevention

We promote activities tostand by
employees andtheir families
to protect mental health.

Basics of infectious disease
prevention measures
Hand washing/coughing etiquette
We will actively
promote activities forearly detection andtreatmentof serious illness.

We aim to establish
suitable exercise
and dietfor healthy lifestyles.

We promotesmoking areas andquitting smoking
to reduce smoking’s
harm on health.

Healthy behaviors target

Healthy behaviors target

Healthy behaviors target

Healthy behaviors target

Build an open andpleasant working environment

Improve health screening
results

Maintain an appropriate
body weight

Smoking cessation
challenge

Health as the source of happiness,
improve health literacy and prevent
serious illness

Physical fitness for extension of theretirement age and of healthy life
expectancy for a happy life in an eraof 100-year lifespans

Prevent secondary health hazards fromexhaled smoke among smokers andnon-smokers (smoke-free premises),
support for smoking cessation

Bidirectional and enhanced
communication skills, improved
work-life balance

79

PhysicalPrevention ofpassive smoking

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Mental• E-learning on mental health for managers and supervisors: 96% of managers andsupervisors attended the course and passed a comprehension test• Implementation of EAP trial counseling (Chita Plant, Corporate Research &Development Center, others)• Regular hosting of workshops on enlivening workplaces by outside speakers for the“Making a company that people look forward to working at every day” project• Interviews with occupational health staff after health examinations: 99.97%
implementation rate in fiscal 2022; commencement of Individual Health Declaration,
to record and keep to hand healthy behavioral targets• Delivered education program of workplace lectures by dispatched public health
Disease prevention
nurses: Employee participation rate of 50% in fiscal 2022
• Health follow-up for employees on overseas postings (pre-departure vaccinations,health examinations on homecoming, etc.)• Recommendations to undergo examinations, including requests from bosses, forthose requiring detailed examinations

Physical• Physical functionality measurements at each plant and follow-up guidance for thosewith poor levels of fitness• Regular provision of healthy menu options and salads at employee cafeterias• Promotional events for consumption of vegetables using the VegeCheck device• Walking events hosted by each plant; implementation of body composition
measurement sessions

Prevention ofpassive smoking• April 2024: Expansion of the scope of no-smoking hours toward achievement ofcompany-wide no-smoking during regular work hours• Co-sponsoring by health insurance association of online smoking cessation programs
and provision of cost subsidies

Individual Health Declaration card

Free provision of salads at Chita
Plant

VegeCheck event

Note: VegeCheck is a registered trademark of Kagome Co., Ltd.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

80

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Contribution to Realizing a
Green Society
Corporate Data

Innovation to Realize a
Green Society

Responsibilities and Contributions to Society

Promotion of Diversity

Encouragement of active roles for women and career development
Introduction of management system for shortened
working hours

Initiatives to promote diversity
We believe that an important factor in building a foundation fordiversity management is the dual pillars of a climate characterized
by a high level of mutual acceptance and a state in which eachindividual can tap into their capabilities, which foster a lively
workplace environment. This will mean that each employee,regardless of their age, gender, personal values, sexual
orientation, disability, their lifestyle/personality, and other factors,
can persist in their work with a sense of fulfillment and satisfaction,
while respecting one another’s differences. This is the driving force
behind manufacturing at the Company. To make this a reality, weare pursuing initiatives to encourage active roles for women, further

enliven the workplace and the entire Company, and bring abouttransformations in awareness and the culture in order to ensurethat each individual can continue to unleash their full potential.

3 steps of diversity promotion
Activities started in fiscal 2014 have proceeded from STEP 1 to
STEP 2. The goal of STEP 2 is to utilize and promote diversity. This
involves implementing initiatives that enliven the workplace andteam dynamics at the organizational level, while also addressing
the competencies and career development of individuals.
STEP 3

STEP 1

STEP 2

Understanding andmutual acceptance• Awareness and acknowledgement of differences
Individuals: Promotion of self-knowledge
Organizations: Transition from reliance on individual capabilities
to harnessing the collective strengths of the team

FY2014–FY2020

FY2021–

Utilization and promotion• Making differences into a strength;
mutually complementing one anotherIndividuals: Identification of own capabilities
Organizations: Improvement of team dynamics;
creating flexible and resilient teams★ FY2023

Instilling culture• Difference is natural• Empowerment and autonomy of each individual
Individuals: Maximizing capabilities
Expansion of each individual’s desire for continuous andautonomous self-growth
Organizations: Maximize team dynamics/organizational capacities;
create autonomous organizations

Management Training for Section Managers and360-Degree Evaluation
We implement training and education to further enhance themanagement skills of the section managers, who are key to theenlivenment of the workplace. Specifically, the training curriculum
incorporates short interviews with subordinates; concrete
feedback on work duties; instruction in how to communicate anddeepen relationships of trust with office staff members while
drawing out individual capabilities and improving team dynamics,
by means of the three steps indicated in the table to the right.
In fiscal 2022, a 360-Degree Evaluation for management-levelstaff was also introduced, with the aim of facilitating theacquisition and consolidation of flexible management skills. The
Job Satisfaction Awareness Surveys and the 360-Degree
Evaluation are designed to deepen understanding oforganizational evaluation (team dynamics) and individual
management skills, respectively, based on objective data.

81

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Implementation of individual interviews
Employees certified as career consultants and industrial
counselors have since fiscal 2018 conducted scheduledindividual interviews with all female employees at the Company,
with the aim of identifying career fulfillment and training anddevelopment issues. For female global staff in particular, wearrange both individual interviews and interviews with their

Expanding duties domains and capacity building for area staff
Area staff play a vital role in bolstering the foundations of theworkplace, and the Company thus provides them with various
training program aimed at helping them to manifest their potential
for the roles they can be expected to fulfill at an early stage. The
selective training initiated in 2017 expands the scope of duties
domains by leveraging experience, and offers training anddevelopment as personnel who will comprise the rear units to
support teams. This latter will involve, for example, learning theskills of immersion and involvement and conceptualization as wellas perspectives of holistic optimization. Area staff who havecompleted selective training are now playing an active part asrole models for these skills.

Testimonials from selective training course participants

FY2025–

Tomomi Fujita,

Support for the creation of job satisfaction—Job satisfaction awareness surveys
Job satisfaction awareness surveys have been conducted for all
employees since fiscal 2020 with the aim of creating job
satisfaction for each individual and enlivening the workplace. The
outcomes of these surveys have brought to light challenges suchas “communication gaps” with their origins in differences invalues between generations (generation gaps); a “reduced senseof unity in the workplace” caused by drastic environmental
changes; and “insufficient management skills to cater to changing
times.” In response to these challenges, initiatives such as theManagement Training for Section Managers and Workplace
Enlivenment Project were launched in fiscal 2021.

In the context of the increased numbers of employees withdiverse working styles, a management system for shortened
working hours was introduced in April 2023. This system aims tofacilitate career development for the next generation of managers
who will work shorter hours. The goals of this system are toprovide opportunities from an early stage to develop the skills
required to undertake management positions in the future,
thereby facilitating employees with the capabilities and motivation
to do so to broaden their activities domains.

supervisors, in order to build career steps and expand
professional domains in a manner tailored to their capabilities andindividual characters, while also seeking to share and findsolutions to their concerns about workstyles during life events,
with all of this designed to feed through to the development of
the next generation of managers.

Number oftimes held

Total numberof participants

STEP 1 Motivating subordinates

12

162

STEP 2 Achieving a balance between systematic training
and education and sustained results

11

142

Curriculum (3-step)

STEP 3 M ethodologies to cater to and train a diverse
workforce

Misato Yasui,

Head Office Director’s Departmental Section

Large Bar Rolling Section, Chita Plant

This training taught me that I can do work that
contributes to the Company depending on how I use
my time from day to day. I hope to put what I havelearned into action to become a superlative area
staff member capable of playing a key role at myworkplace and moreover at the Company.

The training fostered my awareness of ingrained
perspectives, attitudes, and ways of communicating,to transform my relationships with staff at myworkplace. I will be proactive in my efforts tocontinually strive to nurture a mindset and behaviors
which create an atmosphere of mutual approachability
and becoming a reliable presence for others.

Planned implementation in FY2023“Making a company that people look forward toworking at every day” project
We launched a pilot workplace initiative in fiscal 2021 which iscurrently ongoing as part of efforts to support the enlivenment of
workplaces. Based on the principle of “participation by all, withfocused efforts on feasible changes within current resources,
without negativity or criticism,” all members are working together
to envision a workplace one can “look forward to working at
every day.” The ultimate aim of this initiative is to inspire eachindividual to undertake behaviors conducive to this vision and for“the workplace to evolve autonomously.”
At present, a gradual deepening of mutual understanding isbeing facilitated through this process whereby early career andexperienced staff members share their concerns, feelings, andideas about theworkplace together.
Going forward, we arecommitted to actively
continuing our activities,
with care and attention toeach and every process.

Towards the active participation of diverse personnel
Promotion of understanding of LGBTQ community
The Company is furthering initiatives to promote understanding of
LGBTQ community aimed at creating a culture of understanding
and acceptance of diversity. By providing e-learning andincorporating LGBTQ topics into “Fureai DAIDO” (an internal
newsletter) and harassment training aimed at different tiers, weare implementing initiatives to nurture an understanding of these
topics among all employees. Going forward, we will establish a
consultation service, prepare a first response manual for those
responsible at respective offices and plants serving as
consultation contact points, and promote education and othermeasures, to actively create a climate in which the employees
working there can feel more secure.

efforts, we aim to make a reality of an organization at which eachindividual is facilitated in proactively envisioning their career after
their roles have changed or following retirement, and thereby
allow them to continue to play an active role.

Promotion of employment of people with disabilities
The Company is also pursuing initiatives for the promotion of theemployment of people with disabilities, with the aim of creating
workplace environments at which a diverse workforce can work
comfortably.
Rate of employment of people with disabilities (%)

Support for senior personnel
In April 2023, the Company extended its retirement age to 65.
With this change, and in anticipation of changes in the roles they
will be expected to play, we have launched career training
focused on employees in their 50s, as a prompt to achieve
career autonomy and restructure their careers. Through these

1.85

2018

2.06

2019

2.96

2.95

2021

2022

2.33

2020

(FY)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

82

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Contribution to Realizing a
Green Society
Corporate Data

Innovation to Realize a
Green Society

Promotion of Diversity

Education for employees
The Company has instituted a human resource development
policy of “promoting employee autonomy and developing humanresources who will learn (grow) autonomously with high aspirations
and persist in their challenges,” with the aim of developing humanresources that will put the Conduct Guidelines into practice andrealize the Management Philosophy. We conduct training andeducation for employees which is based on our expectations foreach grade, as well as knowledge and skills acquired off-the-job,which are summarized in the skills development guidebook. The
education and training system is comprised of global staff
education and expert education courses.

universities in Japan to improve skills, which includes obtaining
qualifications and degrees, and also extends to research on
cutting-edge technologies. We also arrange study abroad andoverseas trainee placements with a focus on those in their early
careers, as part of our efforts to improve individual capabilities
and develop global human resources.
We furthermore actively utilize outside training with objectives
including the fostering of the mindset of looking beyond thecompany and development of the core personnel who will be
responsible for management in the future.
Number of dispatch employees (persons/year)

Recruit & Education (RE) activities
We consider the continuities from recruitment to the assignment
and training of early career employees to be important in ensuringthat each and every employee can give expression to their fullcharacter and capabilities. We have structured and instituted thecompanywide mechanism of Recruit & Education (RE), with eachsubcommittee taking the lead in consistent activities which
encompass all processes from recruitment to human resources
development. RE committee members are meticulously selectedfrom among division heads at the section to which new recruits
are to be assigned, with a chairperson also selected for eachsubcommittee. In fiscal 2022, two humanities subcommittees
and two science subcommittees met to discuss assignments
and training and education plans emphasizing the individual
capabilities of early career employees.

Global staff course training and education
The environment in which companies operate is currently subject
to dramatic day-to-day changes, which is also resulting in adiversification of the skills and expertise required of each andevery employee, and rendering the necessity to be adaptable tochange more essential than ever before. To cater to thesechanges, it is vital that each and every individual develop thecapacity to undertake autonomous decisions and actions andconstantly develop their abilities. The Company provides various
training and education to instill in employees the motivation to
grow autonomously.
Time investment in global staff training
By conducting off-thejob training in online
hours (h)30formats and making it
25.4
more efficient, we are
18.9
19.3
20
facilitating into increased
12.1
time dedicated to training
10
and education. Currently,
about 70% of all training
0
FY2019 FY2020 FY2021 FY2022
is conducted throughonline education.

Use of domestic and overseas study programs, and outside training
The Company arranges placements of employees to study at(Persons)12

Outside training

Overseas study

9
6

2

0

5

3

4

3

Study at Japanese
university

FY20191

2

FY2020

FY2021

4
1

2
FY2022

Expert course education (Daido Steel Technical Training School)
The Technology Training School is foundational to nurturing
manufacturing capabilities, which is one of the Company’s corecompetencies. Daido Steel Technical Training Schoolcommenced activities in 1940 as the Technician Training Schooland has existed in its current form since 1952, since when it has
supported the training of expert (technical) employees over a
period of more than 80 years.
Training times at Daido Steel Technical Training School (hours/year)(hours) 1,800

1,652

1,636

1,636

1,628

1,612
1,436

1,604

1,200

600

0

FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022

Currently, new recruits from senior high schools are given
approximately 10 months to acquire the skills they will need in
the workplace. This includes mental preparation for life as aworking adult and as an employee at a corporation as well as
support for living on their own, and extends to training on safety,
specialty steel production, mechanical and electricalmaintenance, and skills training. Following this, these new
recruits are assigned to a specialty steel production site. In thisway, we aim to develop highly motivated and active humanresources capable of deepening their knowledge of thecharacteristics of specialty steels and to teach them how thespecialty steels they manufacture enrich people’s lives.

Work Style Reforms
Work style reforms
Daido Steel promotes work style reforms aimed at enabling
diverse personnel to make the most effective use of their timeand location, and exercise their capabilities to their maximum.
We also believe that such work style reforms will serve toenhance our business continuity functions and improve theproductivity of staff. Prompted by our responses to the COVID-19
pandemic, the Company undertook the creation of theinfrastructure for work-from-anywhere environments, including
those for remote work and the introduction of satellite offices. We
have thereby both enhanced our business continuity capacities
and developed a foundation for improved work-life balancealigned with the needs of working people. In addition, each plant
promotes initiatives to increase staff productivity including theactive use of IT tools to improve operational efficiency, activities
to improve the efficiency of meetings, and the transition to apaperless office environment. Head Office is additionally focusing
efforts on reforming office layouts to create pleasant workplaceenvironments.

83

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Companywide outcomes of improving the efficiency of meetings

Total man-hours =total value of man-hours for each meeting*(Total man-hours)* Total man-hours for each meeting =frequency (number of meetings) × length × number of attendees

7,000

Improving operational efficiency through theactive use of IT tools

Before initiative (May 2021)
After initiative (October 2021)-34.8%

Traditionally, staff duties have entailed copious ancillary tasks,
including data processing and data entry, resulting in thegeneration of countless man-hours. Towards a solution to thisissue, system engineers are dispatched to each plant to reduce
man-hours by means of the introduction of robotic process
automation (RPA) for various tasks and the automation ofoperations by using software functionalities. These endeavors
have now begun to yield outcomes, including reductions in thetime taken for particular tasks from several hours to a few
minutes, thereby facilitating labor savings. We additionally host
RPA study groups to further advance the automation. Goingforward, we will roll out demonstrated good practices to otherplants to facilitate further, companywide improvements inoperational efficiency.

Activities to improve the efficiency of meetings
To make meetings more efficient, we first completed acompanywide review of the frequency of meetings and those

Confirmation of initiative entrenchment(October 2022)

3,500-42.1%-37.8%
0

Plants divisions

Sales divisions

Management divisions

Reduction in wasted time through revisions to therules for electronic document management
We implemented a revision to the rules for document
management aimed at improving operational efficiency andfacilitating effective use of data assets. For electronic documentsin particular, there was an absence of uniform rules for document
storage, which resulted in wasted time when searching for
documents. With this, we instituted new rules for the storage ofelectronic documents to improve their searchability. We willcontinue to enhance the usability and convenience of electronic
documents to actively promote paperless workflows.

Data on leave (absences) taken (non-consolidated)
The Company promotes the improvement of environments to facilitate easy access and use by employees of leave systems and otherservices.

Ratio of employees taking childcare leave

Number of employees taking nursing care leave

A diagram of the Company’s employee training system is available at our website.

https://www.daido.co.jp/sustainability/employee/employee/index.html (Japanese only)

eligible or required to attend, with proactive steps then taken to
institute online meeting formats. The Company furthermore
formulated a unique in-house policy on hosting meetings as ameans to ensure meetings can be managed efficiently in an
ongoing manner. As part of this policy, we stipulated that“meeting materials be distributed at least one day in advance ofthe meeting,” and that an overview of only the essential points inthese materials be given at the meeting, with resulting
improvements to make meetings more discussion-oriented. As aresult of these activities, we successfully reduced the number of
man-hours dedicated to meetings by around 37% companywide,
when compared to the situation before this initiative began.

Rate of employees using paid leave

FY2018FY2019FY2020

FY2021

FY2022

(%)

10

11

9

23

32

(of which male employees)

3

3

6

18

28

(persons)

0

0

2

0

0

(of which male employees)

0

0

2

0

0

(%)

55

65

42

59

62

DAIDO STEEL GROUP INTEGRATED REPORT 2023

84

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Responsibilities and Contributions to Society

Social Contribution Initiatives

TopicsDaido Steel Phenix Square (naming rights acquired)

Daido Steel has multiple manufacturing centers throughout Japan, and its corporate activities are maintained with thesupport of all those in these respective regions. We aim to achieve harmony with everyone in these communities throughactivities aligned to the region and characteristics of each plant’s location, and to contribute to the realization of a sustainable
society. In this endeavor, we will take as our themes regional contribution activities, sporting activity support, art and culturalactivity support, and environmental preservation activities.

Activities system

Sustainability Committee
Social Contributions Liaison Meeting (General Affairs Department)
General Affairs
Department

Head office divisions
Collaboration

Regional
contribution
activities

Corporate Planning Department

Sporting
activity
supportESG Management Department
Environment Department

Art andculturalactivity support

Environmental
preservation
activities

Supervising office at each plantCommunities
Local
governments
Mass media
NPO
and all others

Regional contribution activities
Each of our plants is involved in close exchanges with the local
authorities and residents of the communities to which they
belong, aiming to communicate with them through a variety ofevents and activities.
In addition to festivals, cherry blossom viewing, and othermixers and events to promote mutual friendship, we will continue
to play an active role as one member of these communities, andwill undertake diverse initiatives including clean-up campaigns,
cooperation in disaster prevention and crime prevention, anddecorative public lighting displays.

Various mixers and social events
We host seasonal events and provide children with opportunities
to engage in creative activities.

Cooperation in disaster prevention and crime prevention
We actively implement initiatives contributing to disaster prevention
and crime prevention in local communities at each of our plants.

Disasterprevention

Tsukiji Techno
CenterRegistered as a “Community Disaster Prevention Cooperation
Office.” We have concluded agreements with local authorities
for the provision of materials for use in rescue efforts as well as
medical supplies for use in the event of a large-scale
earthquake, or damage caused by winds and flooding.

Hoshizaki Plant Registered as a “Designated Emergency Evacuation Site
gymnasium (on (Tsunami Evacuation Building).” A primary location to which
third floor)
one can flee from the threat of a tsunami.
Crime
Hoshizaki Plant
prevention

Registered as a “Kodomo 110-ban no ie” (children’s
emergency shelter)

We acquired the naming rights for Crystal-Hiroba, a section of the Sakae underground shopping
center, which is one of Nagoya City, Aichi Prefecture’s most popular commercial facilities, and from
June 2023, named this Daido Steel Phenix Square. We will actively contribute to making SakaeChikaan even more popular underground shopping center among the local community.

Sporting activity support
The Company organizes handball and volleyball classes and participates in demonstrations
at various sporting events, with the main aim of contributing to the development of youth.
Our handball club (team name: Phoenix), in particular, visits elementary schools in Tokai
City to give classes and makes other efforts to popularize the sport as hometown
ambassadors of Tokai City.
On-demand handball classes forelementary schools in Tokai City

Art and cultural activity support
The Company sponsors a full variety of art and cultural activities. In particular, sponsoring the concerts of outstanding music performers,
hosted and planned by CBC TELEVISION CO., LTD. which in fiscal 2023 is celebrating its
37th year (33rd with the Company as an exclusive sponsor), has been lauded as aprogram focused on youth musicians and uniquely suited to small and medium-sized halls
dedicated to chamber music, where the audiences can feel as one with performers.
In fiscal 2023, we also sponsored the Noh/Kyogen play Kimetsu no Yaiba (“Demon
Slayer”) and the Nagoya-jo Kodomo Oisen (Nagoya Castle Children’s Shogi Championship).
In this way, we are supporting cultural activities in a wide range of fields.
FY2022 The concerts of outstanding music performers

Environmental preservation activities(biodiversity initiatives)
Biodiversity refers to the ways in which the numerous and diverse
types of life on the planet are connected, with biodiversity loss
recognized globally as being second only to climate change interms of the most important environmental challenges we face
today. In recent years, corporations have been required toincorporate biodiversity considerations into their roles, and Daido
Steel currently participates in initiatives to restore biodiversity
through a variety of environmental preservation activities.
Initiatives

Hoshizaki Plant: Cherry blossom
viewing party

Shibukawa Plant: Exhibition of artworks
by children

Community clean-up campaigns
We conduct clean-up campaigns mainly focused on the vicinitiesof the plant as part of community beautification activities.

Tsukiji Techno Center: Office buildings Hoshizaki Plant: “Kodomo 110-ban noie (children’s emergency shelter)” sign

Hamatonbetsu Hamatonbetsu-cho,
Project
Esashi-gun, Hokkaido

Decorative lighting displays
We provide scenic views and illumination for the enjoyment ofresidents in our vicinity as well as for drivers with year-end
decorative lighting displays.

Daido Forest

85

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Hoshizaki Plant: Decorative lighting
displays

Tsukiji Techno Center: Decorative
lighting displays

Nagiso-machi, Kiso-gun,
NaganoMain activities content• Forest conservation, regeneration activities(removal of bamboo grass, planting ofbroadleaved trees)• Monitoring surveys (biological organisms,
vegetation, etc.)• Became an adoptive parent/curator for forestand carried out tree planting and other forest
conservation activities

Hoshizaki Plant premises, • Raising fireflies on the Hoshizaki Plant premises
Firefly Orchard Daido-cho, Minami-ku,•H osting firefly viewing parties for neighboring
Nagoyaresidents
Inochi wo
Tsunagu
PROJECT

Chita Plant: Community clean-ups Shibukawa Plant: Community
clean-ups

Location

Chita Peninsula, Aichi
Prefecture
Waterfront industrial zone
Green buffer zone (green
belt)• Installation of waterside biotopes*• Establishment of animal pathways• Creation of the Asagimadara Network• Registered as a certified nature-friendly site*B
 iotope: a habitat in which wildlife such as animals and plants can live in astable and settled environment (biological community)

Two major biodiversity projects
Hamatonbetsu Project: an untouched forest with pristine wilderness
A designated Ramsar site wetland and migratory stopover for
Whistling (Bewick’s) Swans. A company-owned forest—Kutcharo
Natural Forest Daido—is located on the island in the middle
separating the large and small
marshes, with this forest covering
an area of 3.73 million square
meters, which is equivalent to about
500 football courts. The Company
is forwarding environmental
forest restoration projects in thisforest in collaboration with local
Scene from tree-planting
environmental NPO Lake Kutcharo
activities
Eco Workers.

Inochi wo Tsunagu PROJECT: forests created by reclaiming the sea
Over 50 years have passed since the industrial complex was
created along the coast of the Chita Peninsula. The green belt
which is currently established in an area spanning more than adozen kilometers in Tokai and Chita cities is referred to as the Chita
Peninsula Green Belt. It consists of forests which are inhabited bya diverse range of living creatures.
Inochi wo Tsunagu PROJECT
is a partnership between 12
collaborating companies, including
Daido Steel, alongside NPOs,
local authorities, and an executive
committee comprised of students,
which is undertaking endeavors to
Scene of the waterside
improve the biodiversity of the Chita
biotopePeninsula Green Belt.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

86

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Responsibilities and Contributions to Society

Supply Chain Management

Action plan for the 2023 Medium-Term Management Plan

In order to fulfill its social responsibilities as a member of society at a higher level, Daido Steel is conscious of the necessityof both initiatives within the Company and throughout the entire supply chain. To achieve these, the Company recognizes that
it is vital to work with business partners who understand our intentions.

Daido Steel Procurement Policy

We will seek to cooperate with our business partners in four areas as part of the 2023 Medium-Term Management Plan.
Action planfor theMedium-Term
Management
Plan

The Daido Steel Procurement Policy defines the basic approach and stance regarding the social responsibilities we must fulfill.
It advocates for fair and equitable transactions, compliance, and respect for the environment, society, and human rights as a means tocontinue to deliver products and services that satisfy customers while simultaneously establishing and maintaining strong partnerships
with our suppliers.
Company
initiatives

https://www.daido.co.jp/about/procurement/policy/index.html (Japanese only)

Initiatives to disseminate the procurement policy
Clear statement ofprocurement policy(including posting/
distribution)

Implementation ofbriefing sessions forbusiness partners

Implementation of CSR
questionnaire*

Implementation of
study groups
Due diligence

Started in FY2021

Started in FY2022

328 companies in FY2022

Implemented from the second
half of FY2023 through FY2024

Dissemination of
procurement policy* CSR questionnaires involve having respondents conduct self-evaluations of the levels of their initiatives concerning corporate governance, human rights, labor,
the environment, fair corporate activities, quality and safety, information security, their supply chain, and coexistence with local communities in accordance withthe procurement policy framework (fair and equitable transactions, emphasis on compliance, and responsibility as a member of society.)

FY2022 Results
The DSP system to enhance cooperation with business partners was launched in May 2022.
(1) DSP activities questionnaires (twice annually) and feedback to business partners → Improved comprehension of DSP activities(2) VA/VE proposals (from 105 in 2021 to 145 in 2022)(3) BCPs (22 new companies) to achieve tangible outcomes(4) Joint consideration of CN and related issues with representative business partners → Maintain considerations of Scope 3 modelcase planning(5) Introduction of Company initiatives at DSP meetings for ESG and related issues

2. Strengthen
management’ agility

3. Expand further overseas
business

4. Promote ESG
management

Concentration on key
growth products that willbe the next priorities

Strengthen resilience toexternal environmental
changes

Expand high-performancematerials

Reduce CO2 emissions andenhance governance• Expedite productdevelopment for CASE
(automotive),
semiconductor andrelated products, andgreen energy fields(1) Decarbonization/carbon
neutral measures

Four areas for• Calculate emissions of businesscollaboration partners
with business • Actively call for proposals to
reduce Daido Steel Group
partners
emissions levels• Sharing prior examples• Pursue low costproduction• Customize function ofeach factory to improve
production efficiency• Cooperate in the formulation of
BCPs by other companies• Share business continuity, etc.
early on• Provide and follow-up on theneeds of Company plants due tostart of new system• Support for operational expenses

Scope(4) Compliance throughout the
supply chain• Implement CSR questionnaire• Commence comprehensive
initiatives for the protection ofhuman rights, information security,
health and productivity
management, etc.

Carbon neutrality

Content
Emissions and intensity calculations (Scope 1/2/3 calculations)
Hosting of emissions calculation study sessions (sharing of calculation methodologies)

VA/VE

Considerations allowing for the needs of Daido Steel plants
Regularly communicate on VA proposals

Improve competitiveness throughan approach of unanimous cooperation

Protection of human rights In-company and supplier compliance in the respect for human rights

DAIDO STEEL GROUP INTEGRATED REPORT 2023

• Build a responsible
supply chain

Future joint actions with business partners

Daido Supplier Partnership (DSP) system

Investigate and implement the adoption of new andother technologies for which proposals are fielded
Introduce new technologies for which proposals are
fielded, as well as giving initiative statuses and casestudies at other companies to a wide range ofbusiness partners• Reduction in CO2emissions (vs.
2013): -14%

(3) Measures to improve costcompetitiveness throughsignificant engagement with
VA/VE

Draft BCPs/improve accuracy

Proactively adopt new technologies• Build supply chains andcapture growing areas• Strengthen costcompetitiveness(2) Measures to strengthen
resilience through theformulation of business
continuity plans (BCPs), etc.

BCP

Jointly seek improvement activities through various
systems (study groups, awards, etc.) and day to day
communication
In addition, conduct questionnaires for business
partners to share issues

87

1. Expand the businessin fast-growing fields

Support for strategy costs

Joint
improvement
activities

Proactive presentations of information
Informationtransmission

Ideas
and
actions

Investigations/
implementation

Business
partners

ProposalsCommunicate the Company’s approaches, needs,
etc. (including procurement policy and theenvironment in which the Company operates) at
meetings attended by the Company’s management
to deepen mutual understanding

Compliance

Ensure thorough compliance with laws and regulations

Information security

Develop infrastructure for information management systems

Safety/health

Ensure occupational safety, promote health and productivity management

ESG lectures during DSP meetings

Responsible mineral procurement
Implement new generational strategies
Receive potential measures and proposals frombusiness partners on SDGs, decarbonization, stableprocurement, and VA/VE

The Company has obtained conflict-free mineral certification forthe 3TGs (tantalum, tungsten, tin, and gold) and Co (cobalt) fromeach of our business partners to confirm that they are not conflictminerals.

In addition to obtaining conflict-free mineral certification for new
sources, we also obtain information from smelting manufacturers
in an effort to ensure risk-free procurement.
We are also engaged in the utilization of recycled products.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

88

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening GovernanceDiscussion Between Outside Directors and Chairperson of the Board of Directors,
Representative Executive Director

Towards Deepening Sustainability Management
Looking towards deepening Daido Steel’s sustainability management, Chairperson Ishiguro and three outside directors had adiscussion.

Ryoichi Yamamoto

Kenji Matsuo

Mutsuko Jinbo

Takeshi Ishiguro

Outside Director

Outside Director,
Audit & Supervisory
Committee Member

Outside Director

Chairperson of
the Board of Directors,
Representative
Executive Director

Director of
J. FRONT RETAILING Co., Ltd.

Meiji Yasuda Life Insurance Company
Honorary Advisor

Please tell us about the governance discussionthat made the biggest impression in the past year.
Yamamoto: In the past year, it was contributing to the formulationof the succession plan that left the biggest impression. I think thediscussions in the succession plan formulation process wereconducted exceptionally well. In selecting the new President, wewere able to make our selection through an objective and highly
transparent process, determining the candidates’ aptitudes inwriting, then spending time on discussions and deliberations in
the Nominating and Remuneration Committee by interviewing thecandidates. I felt my intervening value as an outside director mostin the fact that the new President was selected based on the
succession plan metrics.
Matsuo: I agree completely. I really want to recognize the fact that
the Chairperson and the President have boldly moved initiatives
forward.
Jinbo: I also felt that we put careful consideration into selecting
the person at the top. I think the process of properly reaching a

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DAIDO STEEL GROUP INTEGRATED REPORT 2023

Daido Educational Institutions Advisor
Graduate School of Engineering,
Mie University
Research Fellow

result via orderly discussions and deliberations is governanceworking extremely well. I feel satisfied with the selection of the
new President and this has left a strong impression.
Ishiguro: Personally, I think this was a year in which theNominating and Remuneration Committee was functioning. The
succession plan was too, but it was also decided to introduce a
performance-linked, stock-based remuneration scheme using
trusts. When introducing it, we discussed it from a variety ofperspectives, and I think it has become a remuneration schemethat is also well-regarded by investors in the sense that, due toshare price fluctuations, management shares shareholders’interests. This is thanks to all the outside directors.

Please tell us about your expectations for the new
President and any advice for him based on yourown experience.
Yamamoto: As an outside director, if I am stating the point of viewof the shareholders and taking their position, we must first achieve
a PBR 1.0× or higher. The Tokyo Stock Exchange has been
making serious efforts towards market reform, and there is also ademand for the disclosure and implementation of improvements
to the low PBR, so I hope he will be more aware than ever ofshareholders and investors and strive to improve corporate value
with a sense of crisis. This is my greatest expectation.
Furthermore, my advice based on my long years of experiencein top management is not to avert your eyes from the realities you
don’t want to see. For example, it is precisely because
unprofitable businesses and impropriety are matters of concernthat it is important to face them head-on. In addition, I want him
to be aware of the fact that the impact of COVID-19 and otherproblems has changed employees’ values, and to try to manage
without relying on a “mindset” ideology. Finally, to speak basedon my own reflections, in cases where decision-making is
influenced by the surrounding atmosphere even though you do
not think it is reasonable, it will not result in success, so you must
devote yourself to making reasonable decisions. I want him to
make decisions that will advance us toward Daido Steel’s greatcauses, such as management philosophy and the realization of agreen society.
Matsuo: I also expect a PBR over 1.0x. The new President’s
greatest strength is that he has a technical background, so heunderstands the society-wide trend of reducing CO2 emissions.
It is my great hope that he will demonstrate the management
skills for further improvement in business performance in thefields of high-performance materials and magnetic materials,
which drive the Company’s growth. His career has focused on
the development of materials, so he probably has a variety ofoutlooks and visions regarding current trends. For this reason, I
hope that he will manage the Company with a long-term view,
showing conviction and passion in deciding what he wants us tobe doing in five or ten years and what we need to do to get there.
Furthermore, it is important to form an organization in which,when problems occur, reports are properly delivered to
management. If reports are not delivered when problems occur,
this makes things very difficult for management. I asked many
company presidents who came before me for advice, andseveral of them told me never to reprimand staff for the content
of a report, but to properly warn and reprimand them for not
making a report at all. I think it’s important for a company to be
an organization in which management is smoothly informed ofproblems and issues and which can steadily discuss andimplement solutions.
Jinbo: The management style of the person at the top of auniversity is a bit different from that at the top of a company, but I
think one point both have in common is that, they should try tolisten to the opinions of those around them to see if their ideas
are truly correct, without being self-righteous. At the same time, I
think it is necessary for them to be alone to some extent. As thetimes become more uncertain, the opinions of those around thePresident will become divided and it will become more difficult tomake decisions, so he must be prepared to endure theloneliness and take responsibility for the risks when making
decisions and taking the initiative.
Also, nowadays global trends and world affairs are changing
with tremendous speed, and the pace of change in the industry
has grown more intense. Of course it is important to develop theexisting business, but I think it is also becoming more important

than ever to anticipate the needs of the next generation.
Ishiguro: In its 107-year history, Daido Steel has grown while
overcoming numerous changes in the business environment. I
have heard people on all sides saying they think things are going
relatively well, such as results of the previous fiscal year to
exceed record highs. However, the changes to social structuresthat come along with carbon neutrality have repercussions on
resource circulation and human resources strategies, and wecannot afford to keep doing things the way they have always
been done. With a technical background and no experience inmanufacturing or sales, I want President Shimizu to leverage his
career history, which is different from his predecessors, toadvocate for the antithesis of a going concern. In addition, I hopethat he will produce results such as a PBR over 1.0x and,through co-creation with stakeholders, contribute to therealization of a green society. In the selection of the President thistime, the Nominating and Remuneration Committee decided on
him almost unanimously. He has always thought about how tosolve the issues of the customers by using the products andtechnology of the entire Group, and I think selecting him to headthe Daido Steel Group will be good for the development of theCompany, and I want to fully support him.

Please share your perception of the challenges inpromoting sustainability management.
Yamamoto: I think this will become an issue for the next MediumTerm Management Plan, but we need to set milestones for the
resolution of material issues. If you take a look at the current
progress in areas where there are material issues, it is obscureand difficult to follow up. It would be persuasive if the Company
can show how much profit we expect as a return from supplying
a new product. Visualizing the 2030 supply and profit targets withspecific products and technologies makes it easier for us tomonitor and for our on-site employees to see how a single
product can contribute to the social environment. In this way, we
can instill the concept of creating shared value in the entire
Company.
I think it is quite difficult to quantify the financial impact of
product lineups that contribute to environment and contributions
to the reduction of society’s CO2 emissions, but showing the

DAIDO STEEL GROUP INTEGRATED REPORT 2023

90

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Discussion Between Outside Directors and Chairperson of the Board of Directors,
Representative Executive Director
specific milestones for achieving KPIs, which are material issues,in the next Medium-Term Management Plan will allow us to follow
up on the status of the progress.
Matsuo: As Mr. Yamamoto just said, annual management of thefinancial impact using KPIs is not such a difficult topic in terms of
production, but when it comes to products, it also depends on
how far ahead we can anticipate customers’ needs, so my
impression is that the hurdle is high. Nonetheless, I think weshould try to communicate to customers how much CO2emissions they can reduce with a given product by quantifying
the extent to which our product contributes to the reduction of
CO2 emissions. Being able to contribute to the reduction of CO2
emissions in terms of both production and products can be anadvantage, so I want us to strive to make that appealing tocustomers in specific ways.
Yamamoto: I think that, compared with Europe, both Japanesecompanies and consumers have quite a low sense of crisis withregard to carbon neutrality and the circular economy. This is why
our initiatives are late, and in the meantime, Europe has moved
forward with environmental regulations and new regulations about
the disclosure of corporate information, and I feel that thediscussions are preoccupied with the question of how to deal
with the now-high barrier to entry. I believe that we need tocomprehend the long-term structural changes and then proceedwith intrinsic initiatives instead.
Jinbo: Even in R&D, I feel that there are fewer and fewer settings
in which Japan is taking the lead. To compete as an equal with
the West, we need to not only analyze their competing products
but also to keep our eyes on the capabilities they are fosteringbehind the scenes. When it comes to product performance
improvement, we have two approaches: one is to improvematerials and the other is to change the form of the product. I
want us to cultivate multilateral points of view, explore customer
needs, and strive to create new value and showcase its
contribution.
Ishiguro: Some of the product supply KPI settings are very
difficult. Even for products and materials that we think are good,
there are many unpredictable factors, such as market trends,
which affect whether or not customers will appreciate andpurchase them. If we do not sufficiently anticipate and foresee
the needs for the materials the world wants, both the market
outlook and the KPI settings will be difficult. On the other hand, I
think in regard to the engineering that designs and manufactures

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DAIDO STEEL GROUP INTEGRATED REPORT 2023

consider disclosures aligned with Daido Steel’s management
strategy, independent of external influences.
Jinbo: What I notice in the promotion of diversity is that nochange can be seen in the trend of the percentage of female
managers. I feel that we need to further foster an awareness andculture that encourages the advancement of women. I also
recognize that establishing a workplace environment withconsideration for the LGBTQ community will be a challenge going
forward. Although our awareness of sexual minorities is growing
day by day, I do not think we have resolved the issues they face.
Based on the knowledge acquired in supporting university
students, I will give careful consideration to enabling people withdiverse backgrounds to work here without any problems.

equipment such as electric arc furnaces, we can visualize theextent to which the transition from blast furnaces will contribute to
the reduction of CO2 emissions and improve product efficiency
numbers. Bearing such things in mind, we must consider
monitoring the progress of material issues in terms ofaccountability.

How are human resource-related initiatives going?
Yamamoto: Based on the fact that we are required to disclosehuman capital information under the revised corporate
governance code, and that investors are taking more interest in
personnel and human resources plans as well as long-term sales
and profit plans, in fiscal 2023, we need to put proper
discussions about what our initiatives should look like on theagenda. The important point will be how to envision the businessportfolio in the next Medium-Term Management Plan. As we aretransforming the business portfolio, such as expanding growthbusinesses and the free forging products business, we need toknow the gaps between the personnel needed to implement
strategies and our current personnel, and then determine thestatus of the abilities of our employees. At the same time, if weare going ahead with DX to make up for staffing shortages, inaddition to understanding the current gap in the required digital
personnel, we need to specifically investigate how to securesuch personnel with hiring and reskilling through investment ineducation.
Human capital is an important factor supporting corporate
growth, so I hope we will hold many discussions so that we canclearly explain the mechanisms and the investment plan securing
and retaining the personnel who will actually implement thestrategy, as well as the results and creative value we expect
based on it.
Matsuo: At another company I’m involved in, disclosure of humancapital is also listed in the propositions in the Medium-Term
Management Plan, but they struggle to identify the humanresources suited for management strategy and to establish themethods, indicators, and targets of securing and training humanresources. Among the human capital-related indicators listed in
the newspapers and other media, some raise questions about
their relevance to investment decisions. So I think we should

we summarized the internal management issues, including theGroup companies, and made a report not to the President andthe Audit & Supervisory Committee, but to the outside directors.
This expands the scope of audits conducted by the Audit &Supervisory Committee beyond the traditional legality audits
handled by the Audit & Supervisory Board. I believe this change
in the Audit & Supervisory Committee contributes to increased
governance effectiveness by verifying the appropriateness ofoperations.
Ishiguro: Thank you for the very valuable feedback you haveshared here today. Based on the feedback we received, we will
work to increase the sophistication of sustainability management
and to enhance our corporate value.

Please tell us about the changes in the functionand effectiveness of the Audit & Supervisory
Committee in the year since it was established.
Matsuo: As you know, the Audit & Supervisory Board haschanged to the Audit & Supervisory Committee, and as a resultof discussions among the three members of the Audit &Supervisory Committee, including myself, about enhancing
internal audits, it was decided that we would receive monthly
reports from the Secretariat Division of the CRM Committee,
which is responsible for Daido Steel’s compliance, risk
management, and internal audits. As a result, I feel that there isquite a lot more depth in the reports that the committee members
receive. Based on the information gleaned from these reports,

A message from the newly appointed outside director
I am honored to have been added as a member of theBoard of Directors of the venerable Daido Steel, which
continues to firmly maintain an established position in thespecialty steel industry.
Until now, I have been involved as an engineer insteelworks operations including production management,
investment management, and organizational management
through on-site management and the building ofsteelmaking processes. During this time, I have constantly
implemented reform (improvement) and growth measures.
No matter what kind of operations, the lesson I learned thehard way is that without a stable base of corporate activities,
we cannot focus on our efforts on proactive initiatives,
leading to a delay in growth.
Daido Steel has the technological and solution capabilities
cultivated over 100 years of history and in a rapidly changing
environment. With ESG at the base of its management
policy, the Company has strengthened the foundation of its
corporate activities by pursuing appropriate margins and an
optimal portfolio, enhancing production elasticity, drasticallyreforming operations through DX, and strengthening thedevelopment of people to support these efforts.
Furthermore, the Company has been striving with a

Noriyuki Hiramitsu Outside Director

management vision for further progress,
such as expanding overseas with aneye to the future in growth areas.
To progress steadily along the pathof growth, we need sound and sincere
initiatives based on the current social
environment. Needless to say, as SDGs and D&I spreadand social and individual values are changing greatly, thesocial responsibilities of companies are increasing morethan ever, demanding stronger governance. In such anenvironment, we need to thoroughly eliminate risks byidentifying and preemptively addressing all specific risks
through both inductive and deductive approaches, and tobuild a more complete base for corporate activities. In thisregard, as a member of the same steel and manufacturingindustry, and as a person who has also been trained in acompany rooted in local communities, I believe I cancontribute to the Company.
Based on the conviction that thinking and decisions
based on facts, logic, and figures will bring the correct
results, I want to play a role in the steady and speedy
growth of Daido Steel.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

92

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening Governance

Strengthening of Corporate Governance

Board of Directors

Corporate governancestock exchange, we conform with the concepts of the corporate
governance code, and we work to refer to feedback fromstakeholders, and in particular shareholders, in improving thegovernance level.

Daido Steel views corporate governance as one of the key
issues for management in today’s rapidly changing businessenvironment. We strive to increase management efficiency,
accelerate and improve decision-making, and ensure
management transparency. As a company that is listed on the

Governance system
Audit & Supervisory Committee members or in the committee,
depending on the contents of the matters to be discussed.
Furthermore, efforts are made to further strengthen the Board of
Directors’ governance of management by giving directors who
are Audit & Supervisory Committee members the right to vote in
the Board of Directors.

Daido Steel made the transition to a company with an Audit &Supervisory Committee in June 2022 for the purpose of
speeding up management decisions, enhancing medium- tolong-term corporate value, and further strengthening thegovernance system.
With the transition to a company with an Audit & Supervisory
Committee, part of the execution of operations that was a matterto be discussed by the Board of Directors has been delegated to
the President in an effort to increase medium- to long-term
corporate value by speeding up decision making and focusing
the content of deliberation in the Board of Directors on
management policy and management strategy.
In order to secure a system that enables supervision andmonitoring, the delegated matters are deliberated in the
management meeting attended by directors who are full-time

Number of members of the Board of Directors pursuant to the Articles ofIncorporation

19

Number of directors as of July 2023

13

Number of independent outside directors

5

Number of Audit & Supervisory Committee members

3

Term of directors who are not Audit & Supervisory Committee members

1 yearTerm of directors who are Audit & Supervisory Committee members

2 years

General Meeting of Shareholders
Selection and dismissal

Selection and dismissal

Nominating and Remuneration
Committee (7 times)

Audit/monitor

Board of Directors (13 times)
Audit & Supervisory Committee
3 directors who are Audit &Supervisory Committee members
Of which, 2 outside directors

Accounting audit(External audit)

Mutual cooperation

4 outside directors
1 Chairperson of the Board of Directors,
Representative Executive Director
1 Representative Executive Director, President

including
Audit & Supervisory
Committee Members)

13 directors
Of which, 5 outside directors

President & CEO

Mutual cooperation

Accounting
AuditorManagement
Meeting (26 times)
Deliberation ofimportant topics, etc.

Committees
Executive Board (13 times)

・CRM Committee (8 times)
・Sustainability Committee (10 times)

CRM Department
Audit

Audit

Internal Audit Division

Business divisions

Internal audit

Risk Management Division

Instruction and support

Consultation and report

Group companies(Note) CRM Committee：Corporate Risk Management Committee
CRM Department：Corporate Risk Management Department
Figures in parentheses indicate the number of meetings held in fiscal 2022.

The state of Daido Steel’s corporate governance report is disclosed on the Company’s website.

https://www.daido.co.jp/common/pdf/pages/ir/policy/governance/governance.pdf (Japanese only)

93

DAIDO STEEL GROUP INTEGRATED REPORT 2023

focus at the Board of Directors meetings to be deliberation onmatters such as management policy and management strategy.
Matters to be reported specify reports on the status of businessexecution specified under laws and regulations, as well as others
including reports on the progress and results of matters to be
discussed by the Board of Directors.
In addition, of the matters related to the directors, the executive
officers, etc., the selection and dismissal and the remuneration of
officers is discussed by the Board of Directors after consultation
with the Nominating and Remuneration Committee, which is avoluntary advisory organ to the Board of Directors. The majority ofmembers of this Committee are independent outside directors,
and the Committee works to ensure transparency and objectivity.

Audit & Supervisory Committee
The company rules specify that, as a rule, the Audit &Supervisory Committee meeting is held once a month, and in theyear ending March 31, 2023 it was held a total of 10 times (13times when combined with the three meetings of the Audit &Supervisory Board prior to the transition to a company with an
Audit & Supervisory Committee).
The Audit & Supervisory Committee is composed of threemembers, two of whom are qualified as independent outside
directors, and their specialties and overall career are consideredduring selection.

The members of the Audit & Supervisory Committee supervise
and audit the Directors’ execution of their duties by such means
as attendance at Board of Directors meetings, periodic interviews
with the Representative Executive Director, and various fieldaudits including Group companies. In close collaboration with theInternal Audit Division (CRM Department), they help to maintainthe soundness of management through efforts that include
participation in a variety of meetings, operation of the whistleblower system, and direct instructions for supervision andauditing.

Nominating and Remuneration Committee

Business execution and auditing and internal control mechanisms

Selection and dismissal

The company rules specify that, as a rule, the Board of Directors
meeting is held once a month, and in the year ending March 31,
2023 it was held a total of 13 times.
The matters to be discussed and reported for deliberation by
the Board of Directors are specified in the company rules. The
matters to be discussed include proposals to be submitted at
the General Meeting of Shareholders, matters related to thedirectors and executive officers, etc., matters related to importantbusiness plans, and matters related to the settlement ofaccounts. Of the matters to be discussed, some matters
involving business execution, other than those specified underlaws and regulations and the Articles of Incorporation, arehandled as matters delegated by the President, allowing the

Daido Steel has established a Nominating and Remuneration
Committee as a voluntary advisory organ to the Board of Directors.
The Committee is composed of six members: the Chairperson of
the Board of Directors and Representative Executive Director (thechairperson of the Committee), the Representative Executive
Director, President, and four independent outside directors (oneof whom is a member of the Audit & Supervisory Committee).
The majority of members are independent outside directors,
ensuring transparency and objectivity.
The matters on which the Committee consults are:(1) matters related to the selection and dismissal of directors(2) m atters related to the selection and dismissal of theRepresentative Executive Director and the executive directors(3) matters related to officer remuneration(4) matters related to the succession planning for the CEO andothers(5) Other matters for which the Representative Executive
Director desires the opinions of the Committee.
The Committee met seven times in the year ending March 31,
2023. As for the content of the meetings, matters related to thenomination of officers in (1) and (2) were discussed four times,
matters related to the officer remuneration in (3) were discussed
three times, and matters related to the succession planning for
the CEO in (4) were discussed twice (there is overlap). Regarding
the nomination and remuneration of officers, the opinions of theCommittee are respected, such as consulting with the Board of
Directors after consultation within the Committee and reportingthe content of the Committee in Board of Directors meetings.

Officer remuneration
Remuneration of directors (excluding directors who are membersof the Audit & Supervisory Committee and outside directors) is
paid in cash and stocks, and remuneration of outside directors
and directors who are members of the Audit & Supervisory
Committee is paid in cash. The remuneration levels are determinedby setting the level of remuneration upon achievement of businessresults and the ratio of fixed remuneration to performance-linked
remuneration, referring to profit levels in the executive
remuneration survey conducted by a third-party organization as
well as examples of companies with comparable market
capitalization. The levels are designed so that the higher the
position, the higher the ratio of performance-linked remuneration.

Specific remuneration is discussed by the Board of Directors
via the Nominating and Remuneration Committee, striving tokeep the decision-making process transparent and objective.
Remuneration of directors who are Audit & Supervisory
Committee members is determined based on discussion in the
Audit & Supervisory Committee.
[Monthly remuneration]
This is calculated based on the remuneration table for eachposition within the scope of the monthly limit on remuneration
specified in the Shareholders’ Meeting. For directors (excluding
directors who are members of the Audit & Supervisory

DAIDO STEEL GROUP INTEGRATED REPORT 2023

94

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening of Corporate GovernanceCommittee and outside directors), some performance-linked
remuneration up to the month of June 2023 has been includedin the monthly remuneration, but with the introduction of thestock-based remuneration scheme, performance-linked
remuneration will be paid with bonuses and stock-based
remuneration, and remuneration from July 2023 will only be fixed
remuneration for each position.
(Details of Resolutions of the 98th Annual General Meeting of
Shareholders)• Maximum amount of remuneration for directors (excluding
directors who are members of the Audit & Supervisory
Committee)
Limited to ¥41 million/month• Maximum amount of remuneration for directors who aremembers of the Audit & Supervisory Committee
Limited to ¥8 million/month[Bonuses]
Bonuses are paid to directors (excluding directors who aremembers of the Audit & Supervisory Committee and outside
directors) annually at a specified time. The performanceindicators for bonuses are non-consolidated ordinary income(evaluation weight 80%) and individual performance evaluation(evaluation weight 20%). The reason for using non-consolidated
ordinary income is that it is a business outcome in whichbusiness execution results are directly reflected.
Regarding the payment amount of the performance-linked
part, the standard payment amount for each position is specified,with a payment ratio of 100% (=standard payment amount) when
performance results are achieved and a payment ratio thatfluctuates within a range of 0 to 200% according to the extent of
the achievement (not paid when there are no dividends).
The calculation method of the payment ratio is as follows.
Non-consolidated ordinary income amountPerformance achievement ratio

Payment ratio

200% or more

200%

25% or more, and less than 200%

Result value ÷ Target valueLess than 25%

0%

Bonuses are paid in accordance with the Determination Policy
discussed by the Board of Directors after approval of the total
payment amount by a resolution of the General Meeting of
Shareholders.
[Stock-based remuneration]
Within the range of the limits specified at the General Meeting of
Shareholders, the restricted stocks specified for each position
are issued to directors (excluding directors who are members of
the Audit & Supervisory Committee and outside directors)
annually at a specified time through a stock issuance trust.

Stock-based remuneration is composed of a fixed part paid as
the auditing function of the directors and a performance-linked
part paid as execution results. The fixed part is the issuance ofstocks corresponding to a certain amount regardless of position.
The KPIs of the performance-linked part are consolidated
operating profit (evaluation weight 50%) and consolidated ROE(evaluation weight 50%). The reason for using these two is thatthey are medium-term target values and they promote incentives
for achieving the Medium-Term Management Plan. The stock
issuance of the performance-linked part specifies the standard
amount for each position, with a payment ratio of 100%(=standard amount) when performance results are achieved anda payment ratio that fluctuates within a range of 50 to 150%
according to the extent of the performance achievement (not paid
when there are no dividends). By issuing certain stocks combinedwith the fixed part, setting the lower limit of the payment ratio at
50% promotes management from the perspective of theshareholders and increased medium- to long-term shareholder
value and increases sustainable corporate value.

(1) Fiscal 2021 issues and results of actions[Issues]a. Review of succession planning for CEO and othersb. Strengthening of IR activities and timely and appropriate
feedback to the Board of Directors

e. Designing the management remuneration scheme and thespecific amounts of remuneration[Action plans]c. Appropriate reporting at Board of Directors meetings, seeking
their opinions, and increasing effectiveness.
d. Began initiatives for SR activities and reported the content of
IR activity strengthening at this fiscal year’s Board of Directors
meetings. Efforts will be made to further strengthen activities byreferring to the opinions raised at Board of Directors meetings.
e. Reviewed the remuneration structure and remuneration levels
from fiscal 2022 from scratch, discussed the introduction of aperformance-linked, stock-based remuneration scheme for
officers, as a result of multiple discussions by the Nominating
and Remuneration Committee, at the Annual General Meeting of
Shareholders held on June 27, 2023, and decided to revise theofficer remuneration structure at the Board of Directors meetingon the same day.

[Results of actions]a. Taking action while deliberating in the Nominating andRemuneration Committee.
b. From fiscal 2022, strengthening of IR activities, such asenhancing disclosure of every kind of information through events
such as ESG briefings and initiating IR activities for overseas andindividual investors. Strengthening of activities will continue infiscal 2023.
(2) Fiscal 2022 issues and fiscal 2023 action plans[Issues]c. Potential risks of the entire Daido Steel Group and thecorresponding responses and Crisis Management System
d. Feedback from dialogue with shareholders

Going forward, we will continue efforts to improve effectiveness.

The calculation method of the payment ratio is as follows.

Skill matrix

Consolidated operating profit
Performance achievement ratio

Payment ratio

The seven skill objectives and types

150%

Skills forming the basis for corporate management(1) ESG Management/Planning (2) Manufacturing Technology/R&D (3) Sales/Marketing (4) Finance/Accounting

50% or more, and less than 150%

Result value ÷ Target value

Skills to focus on that will be essential for business operations in the future(5) IT (6) Overseas business

Less than 50%

50%

Skills required in non-financial aspects(7) Legal/Compliance150% or more

Consolidated ROE
Performance achievement ratio

Payment ratio

Baseline value + 2% or more

150%

Baseline value + 1% or more, and less than 2%

125%

Baseline value + less than 1%

100%

Baseline value - 1% or less75%

Baseline value more than - 1%

50%

In addition, in the stock-based remuneration scheme, aremuneration return clause (malus and clawback clause) is
specified. If a scandal or other misconduct related to a director(including those who have retired or resigned) occurs, Daido
Steel may demand that they return all or part of the stock.
(Details of Resolutions of the 99th Annual General Meeting of
Shareholders)• The applicable period during which points are granted todirectors (excluding directors who are members of the Audit &Supervisory Committee and outside directors) shall be specified,
and the upper limit of the amount contributed to the trust in theapproximately four years corresponding to the initial applicable
period shall be ¥600 million or less, and the upper limit of thenumber of points to be granted shall be 50,000 points (1 point =1 stock) or less per business year.

The seven skills were decided by the Board of Directors, with the opinions of the Nominating and Remuneration Committee as
references. The skills required will be reviewed based on the business environment and the demands of society.

Name

Director

ESG
Manufacturing
Sales/
Finance/
Management/ Technology/
Marketing Accounting
Planning
R&D

Takeshi Ishiguro〇

Tetsuya Shimizu〇〇

Tsukasa Nishimura〇〇

Toshiaki Yamashita

〇

〇
〇

〇

Tatsushi Iwata

〇

〇

〇

Tadayuki Kashima〇〇

Akihito Kajita〇〇

Member13/13 (100%)〇

Number of Audit &Supervisory
Committee/
Audit & Supervisory
Board meetings
attendedin FY2022

13/13 (100%)
13/13 (100%)〇〇

13/13 (100%)

〇

–
–
〇

〇

〇
〇

13/13 (100%)〇〇〇

Number of
Board ofDirectors
meetings
attendedin FY2022

Chair

〇

〇

Noriyuki Hiramitsu
Audit & Kenji Matsuo
Supervisory
Kiyoshi Mizutani
Committee
members Susumu Shimura

Overseas
Legal/
Business Compliance〇

Mutsuko Jinbo
Ryoichi Yamamoto

IT

Nominating
Independent
andOfficer Remuneration
Committee

〇
〇

〇

〇

〇

〇

〇
〇

〇

Member13/13 (100%)〇

Member13/13 (100%)〇

Member–〇Member

12/13 (92%)

13/13 (100%)

13/13 (100%)

13/13 (100%)

13/13 (100%)

13/13 (100%)〇

Evaluation of effectiveness of the Board of Directors
Since fiscal 2016, Daido Steel has performed an evaluation of the effectiveness of the Board of Directors, targeting all directors. Until
fiscal 2021, this was done by means of a survey using in-house questionnaires, but from fiscal 2022 we have switched to an evaluation
by a third-party organization with the goal of expanding the content and increasing the objectivity of the evaluation. Along with the resultsof the evaluation, matters such as an action plan to improve items with low evaluation results are reported to the Board of Directors.
Issues and the improvement action results and action plans are as follows.
95

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

96

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening of Corporate Governance

Ensuring diversity of the Board of Directors

Cross-shareholdings

When selecting directors, perspectives that are able to deal with the management of and the issues in each business and to exchange
diverse opinions for the improvement of effectiveness of the Board of Directors are among those that are viewed as important. The
composition of the current Board of Directors is based on viewing ensuring diversity in gender, age, and career history as important, in
addition to individual capabilities as knowledge, experience and skills and a global perspective.

Progress in strengthening of corporate governanceOct. 2004

Jun. 2023

Establishment of Daido Steel Corporate Code of Ethics and Code of Conduct

Apr. 2019

Jun. 2015· Two outside directors· Introduction of executive
officer system

97

Jul. 2016

Start of evaluation of effectiveness ofBoard of Directors

Establishment of Nominating andRemuneration Committee

Introduction of a stock-based
remuneration scheme (for officers)

Jun. 2022

Transition to a company with an Audit &Supervisory Committee

Jun. 2019· Selected one female director · Three outside directors

Susumu Shimura, Director and Member of the Audit & Supervisory Committee

Kiyoshi Mizutani, Director and Member of the Audit & Supervisory Committee

It has been approximately nine years
since the Corporate Governance Codecame into effect, and in that time, Daido
Steel has also carried out appropriatechanges in organizational design related
to the Company’s governance. The
history of our company’s governance(beginning with the introduction of the executive officer system,
and including the establishment of the Nominating andRemuneration Committee, the response to the new Prime
securities market, and the transition from a company with an
Audit & Supervisory Board to a company with an Audit &Supervisory Committee) has coincided with my time as an
executive officer leading up to my membership on the Audit &Supervisory Board and then on the current Audit & Supervisory
Committee, and I have been experiencing the evolution of Daido
Steel’s governance response in real-time.
The required level of governance demanded of companies
and corporate groups these days is much higher than it used tobe, but in the background, society and the environment havebeen changing, and I think the common sense formed by thesociety of that era has become one of the yardsticks for what
governance should look like. I also think that the so-called
adaptability and flexibility companies needed in order to survive
also applies to the governance response.
Through the operation of the Audit & Supervisory Committee
since the previous fiscal year, we have been closely monitoring
the evolution of Daido Steel’s governance and whether its
format has not been a formalized process but accompanied bypractical details. At the moment, I feel that this evolution is
expanding well for the most part, but I think that, going forward,
we should thoroughly consider our concept of the governancethat will deal with the remaining issues in the details and the gap
between what we want them to look like in the future.
From now on, I hope we will work together with the executiveside so that the governance of Daido Steel and the Group
companies will become more evolved, able to respond to thedemands of the times and gain more acceptance and trust fromall stakeholders.

In the period of just over four years sinceJune 2019, when I took up this post at
Daido Steel, I have recognized that the
problem-solving under the Company’s
corporate governance (hereinafter, CG)
has been steadily progressing.
Especially, I have the strong feeling that,since two new departments, the ESG Management Department
and the Corporate Communication Section, were established infiscal 2022, the pace of problem-solving has accelerated.
On the other hand, the demands society makes on our CG
have been continuously rising to ever-higher levels. In particular,
recently there have been loud calls to strengthen humanresources, but I feel that the Company is lagging behind in suchinitiatives. We need to recognize investment in people as amanagement issue and reinforce our efforts, but I think thebiggest issue in this is the promotion of diversity. The
government (Gender Equality Bureau Cabinet Office) requiresthat the target level for the ratio of female officers (directors,
auditors, executive officers) at companies listed in the Tokyo
Stock Exchange’s Prime segment to be 30% or higher as of2030, and a movement has also been seen among institutional
investors that views the circumstances of the appointment offemale officers as important material for determining whether or
not to approve agenda items in the selection of directors of aportfolio company. In Daido Steel’s latest CG report, we
disclosed the doubling of women in managerial positions from15 as of May 2023 to 30 in 2030. However, bearing in mind
that the current composition of officers is such that there is only
one woman out of a total of 13 directors, and the executive
officers are all men, I am very concerned about whether we will
be able to reach the level of the 2030 targets set by thegovernment. I think that, in the future, we will be required toensure diversity that includes not only women but foreign
nationals, people with disabilities, sexual minorities, and others
as targets. In the Company’s management, I hope we will workwith the idea that broadly expanding diversity initiatives andincorporating diverse knowledge, backgrounds, and values bypromoting them is an essential management challenge.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Cross-shareholdings policy for listed stocks
We believe that cooperative relationships with related companies
are essential in all areas of business conducted by the Company,
such as procurement of raw materials and others, development,
manufacture and sale of products, and stable supply. To achievesustained growth in future, we believe it is necessary to maintainrelationships of trust with stakeholders and increase medium- tolong-term corporate value. Therefore, our basic policy is to
reduce cross-shareholdings as a whole while only continuing
appropriate holdings in light of the perspective of increasing
corporate value.

Review of Cross-shareholdings
Every year, Daido Steel reviews the confirmation of the purpose
and appropriateness of holding individual cross-shareholdings in
the Board of Directors. The appropriateness of holdings isreviewed by performing a quantitative review of financial stability,
share price and dividends of the portfolio company, and aqualitative evaluation of the importance in Daido Steel’s businessby considering the amount sold to or from the portfolio company,
the amount of profit and the amount of financial transactions.
Holdings will be reduced if not found to be appropriate according
to the conditions in future.
In the 2023 Medium-Term Management Plan, we decided toreduce the amount of cross-shareholdings (excluding deemedshareholdings) to 20% or less of net assets with an aim to reduce
it to 10% in the long term. In fiscal 2021, which was the first fiscal
year covered by the plan, we reduced holdings of six stocks by¥7.4 billion, and in fiscal 2022, which was the second year, we
reduced holdings of six stocks by ¥1.6 billion, bringing theamount of cross-shareholdings (excluding deemedshareholdings) to 17.7% of net assets. And then, during fiscal
2023, we intend to make a further reduction aiming to lower
cross-shareholdings including deemed shareholdings to 20% orless of net assets. The ratio of cross-shareholdings including
deemed shareholdings to net assets at the end of fiscal 2022
was 24.3%.
Changes in reduction of cross-shareholdings
Amount of shareholdings (excluding deemed shareholdings) ÷ Amount of net assets(%)

Amount of shareholdings (including deemed shareholdings) ÷ Amount of net assets

50

40

29.5

29.5

30

25.6
21.4

20

0

22.5

20.9

18.8
15.2

10

2019/324.3

2020/32021/32022/317.7

2023/3

Voting Criteria
Daido Steel exercises its voting rights by making comprehensive
decisions based on the issuing company not performing
antisocial acts, whether the proposal will contribute to enhancing
the medium- to long-term corporate value of the issuing
company, and the impact on the Company.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

98

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening Governance

List of officers(As of June 27, 2023)

Directors

Directors and members of the Audit & Supervisory Committee
Takeshi Ishiguro

Tetsuya Shimizu

Tsukasa Nishimura

Kenji Matsuo

Kiyoshi Mizutani

Susumu Shimura

Chairperson of the Board of
Directors, Representative
Executive Director

President, Representative
Executive Director

Representative Executive
Director, Executive Vice
President

Director, Audit &Supervisory Committee
Member<Independent Officer>

Director, Full-Time Audit& Supervisory Committee
Member<Independent Officer>

Director, Full-Time Audit& Supervisory Committee
MemberBio
Apr. 1980 Joined Daido Steel Co., Ltd.
Jun. 2023 Chairperson of the Board of Directors, Representative Executive
Director (current position)

Bio
Apr. 1985 Joined Daido Steel Co., Ltd.
Jun. 2023 President & CEO, Representative Executive Director(current position)

Bio
Apr. 1981 Joined Daido Steel Co., Ltd.
Jun. 2016 Representative Executive Director, Executive Vice
President (current position)

Toshiaki Yamashita

Akihito Kajita

Tatsushi Iwata

Representative Executive
Director, Executive Vice
President

Director

Director

Bio
Apr. 1986 Joined Daido Steel Co., Ltd.
Jun. 2023 R epresentative Executive Director, Executive Vice President,
General Manager, Specialty Steel Business Division, and General
Manager, Tool Steel Business Division, and General Manager,
Tokyo Head Office (current position)

Bio
Apr. 1986 Joined The Industrial Bank of Japan, Limited
Jun. 2021 Director, Managing Executive Officer (current position)

Bio
Apr. 1987 Joined Daido Steel Co., Ltd.
Jun. 2023 Director, Managing Executive Officer (current position)

Bio
Apr. 1973 Joined Meiji Life Insurance Company
Jul. 2001 Director and General Manager, Real Estate Investment
Department
Apr. 2005 Managing Director of Meiji Yasuda Life Insurance Company
Dec. 2005 President
Jul. 2006 President, Director, Representative Executive Officer
Jul. 2013 Representative Executive Officer
Jul. 2013 Senior Adviser
Jun. 2017 Audit & Supervisory Board Member of Daido Steel Co., Ltd.
Apr. 2022 Honorary Advisor, Meiji Yasuda Life Insurance Company (current
position)
Jun. 2022 Director, Audit & Supervisory Committee Member of Daido
Steel Co., Ltd. (current position)

President & CEO

Name

Tsukasa Nishimura

Assistant to the President
Supervisor of all departmentsin charge of CRM Department
In charge of risk management and complianceToshiaki Yamashita

Assistant to the President
In charge of all sales departments, Sales Management Department, Hot Forming Division
General Manager, Specialty Steel Business Division, General Manager, Tool Steel Business Division, General Manager, Tokyo Head
Office (commissioned post)

Takaaki Taketsuru

In charge of Environment Department, Innovative Safety and Health Department, General Affairs Department, Legal Department,
Personnel Department, Director’s Departmental Section
Assistant to Executive Vice President Nishimura for risk management and compliance and the CRM Department
Assistant to Managing Executive Officer Iwata for the environment of the ESG Management Department

Akihito Kajita

In charge of Finance & Accounting Department, IT Planning Department, Internal Control (Financial Instruments and Exchange Act)

Yuji Noguchi

In charge of Procurement Department, Machinery Division

Tatsushi Iwata

In charge of Corporate Planning Department, ESG Management Department, Planning Department for Affiliates

Tadayuki Kashima

In charge of Manufacturing Division, Advanced Manufacturing Department
General Manager, Production Division (commissioned post)

Ikuo Sugie

In charge of Corporate Research & Development Center, Technical Planning & Administration Department
Assistant to Executive Vice President Yamashita for the Specialty Steel Technical Service Department
Assistant to Managing Executive Officer Iwata for the ESG Management Department reduction of CO2
General Manager, Functional Products Business Division (commissioned post)

Muneyoshi Matsuo

General Manager, Fabricated Materials Business Division (commissioned post)

Hisashi Hirose

Shibukawa Plant Manager, Production Division (commissioned post)

Masayasu Nukushina

General Manager, Hot Forming Division (commissioned post)

Tetsuya Niwa

General Manager, ESG Management Department (commissioned post)

Akihiro Nagatani

Chita Plant Manager, Production Division (commissioned post)

Takeshi Watanabe

General Manager, Planning Department for Affiliates (commissioned post)

Takashi Kano

General Manager, Corporate Planning Department (commissioned post)

Shin Takamiya

Assistant General Manager, Specialty Steel Business Division, General Manager, Osaka Branch (commissioned post)

Mikine Kishi

Hoshizaki Plant Manager, Production Division (commissioned post)

Executive Vice President
Bio
Apr. 1987 Joined Daido Steel Co., Ltd.
Jun. 2023 Director, Managing Executive Officer, General Manager of
Production Division (current position)

Outside Directors
Ryoichi Yamamoto

Noriyuki Hiramitsu

Outside Director<Independent Officer>

Outside Director<Independent Officer>

Outside Director<Independent Officer>

Managing Executive Officer
BioMar. 1992 Acquired Doctor of Engineering at Nagoya University
Apr. 1996 Assistant Professor of Materials Engineering Laboratory,
Daido Institute of Technology
Apr. 2001 Professor, School of Engineering, Daido Institute ofTechnology
Apr. 2017 Director of Daido Educational Institutions
Apr. 2017 President of Daido University
Jun. 2019 Director of Daido Steel Co., Ltd. (current position)
Apr. 2023 Advisor, Daido Educational Institutions (current position)
Apr. 2023 Research Fellow, Graduate School of Engineering, Mie
University

Bio
Apr. 1973 Joined The Daimaru, Inc.
Feb. 1993 Manager of Sales Planning Department, Osaka Umeda Store
Feb. 2001 D irector, and General Manager of Sales Reform
Promotion Office and General Manager of Sales Planning
Office, Department Store Operations Headquarters, Head
OfficeMay 2003 President and COO
Sep. 2007 D irector, J. FRONT RETAILING Co., Ltd., Director,
Matsuzakaya Co., Ltd.
Mar. 2010 President of Daimaru Matsuzakaya Department Stores Co. Ltd.
Apr. 2013 President of J. FRONT RETAILING Co., Ltd.
May 2017 Director, President, and Representative Executive Officer
May 2020 Director and Board of Directors Chairperson (current position)
Jun. 2021 Director of Daido Steel Co., Ltd. (current position)

Bio
Apr. 1991 Joined Nippon Steel Corporation
Apr. 2016 General Manager, Head of Div., Production & TechnicalControl Division, Nagoya Works, Nippon Steel &Sumitomo Metal Corporation
Apr. 2018 Assistant Head of Works, Nagoya Works, Nippon Steel& Sumitomo Metal Corporation
Apr. 2020 Executive Officer, Head of Center, Plant Engineering andFacility Management Center, Nippon Steel Corporation
Apr. 2023 Managing Executive Officer, Head of Works, Nagoya
Works, Nippon Steel Corporation (current position)
Jun. 2023 Director of Daido Steel Co., Ltd. (current position)

Reason for selection of independent outside directors
Mutsuko Jinbo
Ryoichi Yamamoto

99

It was determined that she is well qualified because she was involved in management as the director of an educational corporation and the president of a university until March 2023, and, having been
active as a professor for many years, she has a wide range of experience and knowledge.
It was determined that he is well qualified because he has served for many years as a Representative Executive Director and a Representative Executive Officer in different industries than that of Daido
Steel, and he has a wide range of experience and knowledge.

Noriyuki Hiramitsu

It was determined that he is well qualified because he has a wide range of experience and knowledge as a management executive of a leading company in the steel industry.

Kenji Matsuo

It was determined that he is well qualified because he has a wide range of knowledge and insight on management based on his experience in top management of a financial institution.

Kiyoshi Mizutani

It was determined that he is well qualified because he has a wide range of knowledge and insight on management based on his experience as a management executive of financial institutions and full-time
audit & supervisory board member of an operating company.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Executive Officer

Assignment of business operations and commissioning of posts

Tetsuya Shimizu

Director

Mutsuko Jinbo

Bio
Apr. 1981 Joined Daido Steel Co., Ltd.
Jun. 2019 Full-Time Audit & Supervisory Board Member
Jun. 2022 Director, Full-Time Audit & Supervisory Committee
Member (current position)

Executive Officers and the assignment of business operations and commissioning of posts
Position

Tadayuki Kashima

Bio
Apr. 1982 Joined The Tokai Bank, Limited
Jun. 2010 Executive Officer of The Bank of Tokyo-Mitsubishi UFJ,
Ltd.
Jun. 2010 Executive Officer of Mitsubishi UFJ Financial Group, Inc.
Jun. 2012 Deputy President of MST Insurance Service Co., Ltd.
Jun. 2015 Full-Time Audit & Supervisory Board Member of NIPPONSHARYO, LTD.
Jun. 2019 Full-Time Audit & Supervisory Board Member of Daido
Steel Co., Ltd.
Jun. 2022 Director, Full-Time Audit & Supervisory Committee
Member (current position)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

100

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Contribution to Realizing a
Green Society
Corporate Data

Innovation to Realize a
Green Society

Strengthening GovernanceRisk Management

Risk map-based risk management activities
Regarding individual risks, the division responsible forcompanywide risk management is designated as the Risk Owner(2nd Defense). Risks are organized by degree of impact and levelof countermeasures and a risk map is created. The risk map islinked to the Medium-Term Management Plan, and each risk

Daido Steel believes that risk management and compliance are the starting points for ensuring the continuity of its
businesses, and perceive them to be one of the most important management issues.

evaluation is reviewed and updated once every three years. The
developed risk map is discussed and approved by the CRM
Committee, and from among these, working groups areorganized to respond to particularly high risks, and measures aretaken across the organization as special risks.

Risk map (Excerpted version)

Risk management system

The risk map identifies 81 important risks.
Insufficient

Inadequacies in information management

WG 4

Information security, inadequate management ofcorporate confidential information
Cartels

Export security control

WG 1

Floods, torrential rain, fires,
explosions, and inadequate BCP

Earthquakes, infrastructure disruptions,equipment damage, deterioration, etc.

WG 2

Domestic affiliates
Governance failures
Safety (Serious accidents)

WG 3
P.76, 84

Harassment, workstyle reforms

P.77, 78

Lightning strikes
Insider transactions

Inadequate response to legal revisions
Failure to purchase property & casualty insurance
Bribery of overseas public officials (FCPA violation)

Foreign exchange movements
Bad debt

Damage to warehoused products

Board of Directors

Audit/monitor

P.104

Delay in establishing
employment system
for the elderly
P.82

Progress
observation

Audit & Supervisory
Committee

P.85, 86

Inadequacies in theinternal reporting system

Sufficient

Risk management system structure

Human resources development
P.83
Transmission of techniques to next generation

Inadequacies in overseas
affiliate control

Coexistence withlocal communities

Level of countermeasures

the risks surrounding the Daido Steel Group and mattersconcerning internal control, and it supervises the status ofoperation of internal controls pertaining to risk management andfinancial reporting.
The Company periodically formulates and revises a risk map
on the risks that impact business operation, assesses risks, andselects important risks related to the Company and notifies therelevant divisions. Furthermore, working groups (WG) areestablished for risks that should be addressed by the entire
company, and they conduct companywide activities andperiodically report to the CRM Committee.
Furthermore, we have built a three lines model with the CRM
Department as the final line of defense as a system for dealing
with various risks, laws and regulations.

In order to achieve the sustained growth of the Daido SteelGroup, we have established Risk Management Regulations
stipulating basic matters on risk management, and are
conducting activities accordingly. Based on these regulations,risks are defined as events that could have a detrimental impact
on the Company, and we perform comprehensive and integrated
tracking and evaluation of risks, determine policies on responses
to risks, implement preventative measures, and implement
ongoing monitoring of these activities.
To promote these initiatives, an officer who is responsible forrisk management and compliance serves as the company-wide
supervisor of risk management and compliance. Furthermore,
the Corporate Risk Management (CRM) Committee chaired by
the President that is an advisory organ to the Board of Directors
has been established as an organ to discuss matters related toLow

CN response delays

P.67-70

Rapid changes in product demand
Inspection data scandals

High

Degree of impact

Mutual cooperation

Accounting Auditor

President & CEO

Accounting audit(External audit)

Mutual cooperation

Addressing major risks
For important risks that require a company-wide response, we have organized a working group (WG), and all relevant divisions work as
one to carry out risk reduction activities.

CRM Committee

Executive Board
CRM Department

WG activities: past results and initiatives from FY2023 onwards

Audit

Auditing Section

Activity support andinternal audit

Risk Management Section
Audit, education,and support

Group CRM Study Sessions

Business divisions

Instruction and support

WG NameConsultation and report

Participation[WG1] Export
management
and cartel

Group companies

CRM Department
Consult

Second defense

Head office divisions(Risk Owners)

Compliance education
Internal audit

First defense

101

Consult

Each division(departments and business divisions)

DAIDO STEEL GROUP INTEGRATED REPORT 2023

ExportManagement

As the final line of defense for compliance, we conduct audits, education, andsupport activities for business divisions and Group companies.

Legal Department

We develop rules such as regulations and manuals for each law, monitor the
status of business execution in each division, and provide correction support
when problems occur.
SupportInternal audit

Group companies

Corporate Planning
Department
CRM Department

Risk owners support activities
Internal audit

Cartels
Consult

Activity objective and content

Compliance risk reduction activities aimed at preventing violations of export security controls (Foreign Exchange and Foreign TradeAct) and competition laws.
Technology Planning &Administration
Department

Diagram of the three lines model

Third defense

Relevant divisions

Sales Management
Department
Legal Department
CRM Department• The Export Management Committee, whose members are executives and export management officers, and the
Daido Group Export Management Liaison Meeting, whose members are export management officers from Daido
Steel Group companies, are held regularly to provide the latest information on legal revisions. Various issues andinternal audit results were shared.
• We have established a workflow system for export management classification review, introduced a system forhalting incoming orders, and created a system for more rigorous screening. Additionally, we conduct internal audits
and e-learning education for Company and Group companies every year, and will continue to do so in the future.
• Cartel prevention training was provided to all sales divisions to ensure compliance with competition laws. We also
create educational content and deliver it to relevant departments.
• We establish internal rules to prevent cartels and educate employees through e-learning. Additionally, we willconduct internal audits of sales divisions, etc. to reduce the risk of violation of competition laws.

Execute operations according toestablished rules.

DAIDO STEEL GROUP INTEGRATED REPORT 2023

102

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Risk Management

WG NameRelevant divisions[WG2] BCM

Activity objective and content

Company-wide BCM activities aimed at business continuity in the event of an emergency (such as a major earthquake)• We are formulating a business continuity plan for the head office management division in the event of a major
earthquake on the Nankai Trough. Starting in fiscal 2020, we have conducted BCM training once a year to maintainthe function of our headquarters, in anticipation of post-disaster response. In fiscal 2023, we will continue to
implement initiatives to evolve our operations continuity plan into a more effective business continuity plan based on
the issues identified through training up to last year, as well as BCM training with the participation of management.

Head Office
Management
Committee

Each management
division
CRM Department
Technology Planning &Administration
Department

DisasterPrevention
Committee

General Affairs
Department
Environment Department• Promoted earthquake and disaster prevention measures at plants. Specifically, we took measures to prevent
equipment oil leaks during torrential rain, measures to prevent residual risks of explosions and fires with a focus on
saving lives and reducing disasters during power outages, and preparing evacuation routes in case of emergencies.
From a BCP perspective, we are also investing in early recovery after power outages through equipment protection.
We will continue to implement earthquake resistance, disaster prevention, and mitigation measures.

CRM Department
BCP (Sales)
Committee[WG3]
Governance ofGroupcompanies

Sales Management
Department• We screened all products to see if they could be manufactured in an alternative way in an emergency, andconsidered ways to continue supplying the products. In order to fulfill our responsibility to supply to our customers,
we will continue to review and rebuild the BCP of our sales and plant division.

CRM Department

Various activities designed to improve the Daido Steel Group’s risk management and compliance standards
Planning Department for
Affiliates
CRM Department• In order to strengthen the risk management system and improve the effectiveness of its operations across the entire
Group, we are implementing detailed responses through Group company-led education and study by theme areaand mutual exchange of information activities (Figure: Group CRM study sessions and seven subcommittee
activities). We also conduct risk-based education, internal audits, and individual consultations for group companies.

Activities to reduce information security risks by managing personal information, technical information, and other confidential
information and by implementing cybersecurity measures[WG4]
Information
management

General Affairs
Department
Technology Planning &Administration
Department
IT Planning Department
CRM Department• We created an information management guidebook and provided education to all employees through e-learning.
We also conducted an internal audit of risk owners. We will continue to conduct regular audits and to provide
education in the future.
• Promoted cybersecurity measures. Measures included strengthening the monitoring system, examining incident
response and other measures, conducting training for dealing with fraudulent e-mails, purchasing property &casualty insurance, and publicizing the issues through posters. In fiscal 2023, we will proceed with building a
Computer Security Incident Response Team (CSIRT)* system.
* Specialized team to respond to information security incidents

Daido Steel Group CRM Subcommittee activity system and results of events held in FY2022

Opinions from Daido Steel Group CRM
subcommittee activities participantsGroup CRM Study Sessions

Secretariat (CRM Department)
Outside consultant<Various subcommittee activities>

Subcommittee
nameNumber of times
subcommittee
activity took place
Number ofparticipatingcompanies

Audit &
Supervisory
Board
memberImportantlaws andregulations

2 times–*

40
companies*12–*2Internal
control

2 timesInternal
audit

1 time4
6companies companies

Risk management/
BCP*3

4 times

27 companies

Human
resourcesand Labor

4 times
27
companies

Hitoshi Iwatsuki
Daido Life Service Co., Ltd.
Planning Department

As a member of the Daido
Steel Group, we are engagedin CRM activities, and as partof this we also participate
in subcommittees. We aredelivering the content of the Risk
Management Subcommittee and
BCP Subcommittee within thecompany and working to expand
the level of activities such as
BCM document formulation andtraining.

Compliance
Compliance initiatives
In order to secure the trust of all stakeholders and respond to social requirements, Daido Steel considers compliance to be one of themost important management issues and believes it to be a major prerequisite for ensuring the continuity of its businesses. Compliancestatus is reported to the CRM Committee in a timely manner. In order to instill and ensure thorough compliance, we are vigorously
implementing the following various initiatives.

Corporate Code of Ethics,
Code of Conduct
Daido Steel has established the Daido
Steel Code of Conduct and the Daido
Steel Corporate Code of Ethics which
every officer and employee of theCompany is required to follow. The Codeof Conduct Guidebook is distributed toall employees and training is offered toeach tier of the workforce. In order topractice sustainable corporate behavior
in light of changing social requirements,
in August 2023, the contents of thecurrent Daido Steel Corporate Code of
Ethics were revised and renamed to the
Daido Steel Group Corporate Code of
Ethics. In the future, we will also focus
on reviewing our conduct standards andpublicizing them and providing
education.

<Daido Steel Group Corporate Code of Ethics>
Daido Steel strictly observes and adheres to all laws, international rules, and their mindset, both domestically andinternationally, and behaves in a socially sensible manner based on the following ten principles.
1.	Achieve sustainable economic growth and resolve social issues through technology, service, and quality that maintain thesatisfaction and trust of customers and society.
2.	Conduct fair, transparent, and free competition, as well as fair trade and responsible procurement. We will also maintainsound and normal relationships with political and administrative institutions.
3.	In addition to proactively and fairly disclosing corporate information, we will engage in constructive dialogue with a wide
range of stakeholders to improve corporate value.
4.	Manage in a way that respects the human rights of all people.
5.	Earn customer satisfaction and trust by providing appropriate information regarding products and services and engaging insincere communication with customers.
6.	Respect employees’ diversity, personality, and individuality while creating a rewarding work environment that takes safety
and health into consideration, and achieves comfort and high quality of life.
7.	Environmental issues are something common to all people and we will act proactively as an essential requirement for acompany’s existence and activities.
8.	Conduct all corporate activities as a good corporate citizen in compliance with corporate ethics and legal requirements.
Also, give careful attention to protecting personal and customer information. In conducting international corporate activities,
we respect various international norms and local cultures and customs, and manage in a way that allows contributions totheir development.
9.	Take a stringent and resolute attitude toward any unreasonable demands from antisocial forces or organizations thatthreaten the order and safety of civil society and cut ties with them. In addition, we thoroughly implement organizational
crisis management in preparation for terrorism, cyberattacks, natural disasters, etc.
10.	T o realize the Daido Steel Group Corporate Code of Ethics, the management will take the lead is building effective
governance by setting good examples and ensuring that the Corporate Code is thoroughly understood within the Company
and Group companies. We will also encourage the supply chain to do the same. In the event of any violation of this code,
management shall proactively investigate and resolve the matter, and make a prompt and accurate disclosure of information
pertaining to the matter. After such disclosure, management will take measures to prevent recurrence, and will discipline
violators appropriately.

Internal reporting system
We have established Internal Reporting Regulations and maintainan internal reporting system to receive consultations andreporting on compliance in Daido Steel and Group companies. In
addition to the responsible division and the officers of the Audit &Supervisory Committee, we have established an external point ofcontact for whistle-blowing, ensuring independence and creatinga system in which employees can report with peace of mind. The
contents of the whistle-blower report are reported to the officer incharge of risk management and compliance and the Audit &How the internal reporting system works

Trend in number of reports

103

DAIDO STEEL GROUP INTEGRATED REPORT 2023

■ Harassment■ Labor management■ Improper handling of operations■ Private use etc. ■ Assault etc. ■ Other(cases)48
50■ Board of Directors, Executive Committee, CRM Committee■ Audit & Supervisory Committee
Report■ Whistleblower■ Consultant

Whistle-blow

Consult■ Hotline(1) CRM Dept.
(department in charge)(2) Audit & Supervisory
Committee members(3) Outside hotline■ Investigationteam• Fact confirmation(interviews withconcerned parties,
evidence gathering, etc.)■ Decision• Determine
complianceviolation

Correction

Subject ofwhistle-blowing■ Department
Instruction■ Suspect(s)

9

40

4
6

30
20
10

Feedback*1 Indicates the number of companies where the target member serves as an Audit & Supervisory Board Member.
*2 In fiscal 2022, we shared information on important law and regulations revisions and legal guide within the Group.
*3 Joint meetings were held by two subcommittees; the Risk Management Subcommittee and the BCP Subcommittee.

Supervisory Committee member, and personnel in charge ofhandling whistle-blowing conduct investigations and corrective
actions based on their instructions. Furthermore, the operational
status is reported to the CRM Committee, Board of Directors,
etc. According to the results of the fiscal 2022 employee
compliance awareness survey, awareness of the internalreporting hotline was 91.2%. In the future, we will continue tobuild a system that allows employees to report incidents withpeace of mind and publicize further awareness activities.

0

40
1 6

40
3

9 1
1

7 1

13

11

1 1

2 2
6

2018

3

1
1

28

23

26

2021

2022 (FY)

7 3

2019

2020

DAIDO STEEL GROUP INTEGRATED REPORT 2023

104

Contribution to Realizing a Green Society

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Compliance

Addressing important laws and regulations
The Daido Steel Group has identified important laws andregulations to be followed in the course of business operations
and compiled a list of Important Laws and Regulations, evaluating
their importance from various angles. The evaluation items
include the degree of influence of laws and regulations, thescope of relations, and management. The relevant laws andregulations are scored for each item and then classified into S, A,
and B according to the scores.
The Daido Group Important Laws and Regulations are updated
regularly, and in February 2023, 267 laws and regulations wereselected. Among these, we are addressing the most importantones, and each risk owner and the CRM department arecooperating to implement e-learning on the Important Laws andRegulations, provide necessary risk-based education, andconduct internal audits. Additionally, information on newly
established and revised Daido Group Important Laws andRegulations is distributed to each risk owner within the Company
and each Group company, and is also reported to the CRM
Committee in a timely manner.

Main S and A rank laws and regulations and actions (FY2022)

Foreign exchange and foreign trade act (export security control)

Implementation of export management education (training for new graduates and within each division) and audits of theCompany (50 departments) and Group companies (16 target companies). Holding committees and meetings (Export
Management Committee (1 time), Internal Export Management Officer meeting (4 times), Daido Group Export Management
liaison meeting (1 time), Secretariat meeting (5 times))

Laws related to the environment (soil, air, water, waste, etc.)

Implemented compliance audits of the Company’s plants and offices (nine sites) and Group companies’ plants (27companies). We confirmed the compliance status of the following laws and regulations: Water Pollution Prevention Act, Act
on Rational Use and Proper Management of Fluorocarbons, Law Concerning Special Measures against PCB Waste,
Poisonous and Deleterious Substances Control Act, Fire Service Act, and Act on Waste Management and Public Cleansing.

Act on the Protection of Personal Information and related laws and regulations

We conducted audits of and interviews with risk owners*.
* Act on the Protection of Personal Information Act, etc.: General Affairs Department, Number Act: Personnel Department,
Whistle-blower Protection Act: CRM Department (Division in charge of internal reporting system)

Act on Comprehensively Advancing Labor Measures, and Stabilizing the
Employment of Workers, and Enriching Workers’ Vocational Lives, Act on
Implementation of harassment prevention education: new section manager and lead supervisors training, education for each
Securing, Etc. of Equal Opportunity and Treatment between Men and Women tier of the workforce (held online, 19 times in total), face-to-face seminars for all lead supervisors and supervisor in thein Employment, Act on Childcare Leave, Caregiver Leave, and Other Measures Company’s expert course (160 people), individual training for Group companies (four companies, total of 521 participants).
for the Welfare of Workers Caring for Children or Other Family Members
Labor Standards Act, Industrial Safety and Health Act, etc.

Conducted Group company audits regarding the management of labor hours, etc. (27 companies). Conducted Worker
Dispatch Act audits (total of 23 companies).

Elimination of antisocial forces
The Daido Steel Group Corporate Code of Ethics and the Daido
Steel Code of Conduct stipulate rejecting antisocial forces, andaim to resolutely confront antisocial forces. We are taking
necessary actions with risk owners as the main actors and are105

FY2022 results• Keynote address by the officer in charge of risk management andcompliance, and delivery of video message to all employees (photo)• Publicizing activities in the internal newsletter during Corporate Ethics Month

FY2023 Plan

• Lectures by outside lecturers during Corporate Ethics Month (Theme:
Anti-corruption (Planned))• Internal newsletter compliance special feature

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Anti-corruption policy

products and services from the market, but also undermines
the fairness and reliability of public affairs and aggravates
human rights, labor, and environmental issues. Furthermore,
if a company is caught for bribery, it would be fined a large
amount of money and lose social credibility, which could
threaten its very foundation.
Therefore, in consideration of the above, the Sustainability
Committee repeatedly deliberated on top management’s
commitment to preventing bribery. Based on the Daido
Steel Group Management Philosophy, Corporate Code of
Ethics, and Sustainability Basic Policy, we established the
Daido Steel Group’s Anti-Bribery Policy in June of this year,
signed by the president, and announced on our website.

To prevent corruption, in 2003, the Daido Steel Group
Corporate Code of Ethics specified that we “maintain soundand normal relationships with political and administrative
institutions.” Through competing for business andconducting appropriate business in a fair, transparent, andfree manner, we aim to put the Daido Steel Group’s
Management Philosophy into practice and realize a futuresociety where people can live affluent lives.
Bribery of and by public officials is regulated in many
countries where the Daido Steel Group has expanded
operations. Bribery not only eliminates low-cost, high-quality<Daido Steel Group’s Anti-Bribery Policy (Excerpted version)>
Foreword• Practice our management philosophy through competing for business andconducting appropriate business in a fair, transparent, and free manner, andstrive to realize a future society.
• The Daido Steel Group has set this policy (declaration) based on the Group’s
awareness and management philosophy regarding bribery.

• Take appropriate measures such as reporting to relevant authorities andcooperating with investigations.
• Violators will be appropriately disciplined.
3. Relationship with business partner• Require compliance with laws and regulations by stipulating anti-bribery
provisions in basic transaction contracts.

1. Prohibition of bribery• Do not engage in any bribery of public officials, etc.
• Do not tolerate such acts for any reason.

4. Education• Engage in educational and awareness raising activities for officers, employees,etc.

2. Development and operation of organizational frameworks• In order to improve the effectiveness of bribery prevention, we will establish andappropriately operate organizations and systems using a risk-based approach.
• Ensure effectiveness by communicating information in the event of an
emergency.

5. Monitoring and improvement• Conduct monitoring regularly.
• The series of processes will be regularly reported to management and efforts
will be made to improve them.

The full text of the Daido Steel Group’s Anti-Bribery Policy is disclosed on its website.

building relationships with outside specialized organizations suchas police and lawyers on a daily basis. In addition, we stipulate
provisions on the elimination of antisocial forces when concluding
agreements with new business partners.

Implementing employee compliance awareness surveys and awareness raising activities
In fiscal 2022, we implemented Employee Compliance
Awareness Surveys targeting all employees working at theCompany. It is carried out once every few years and managed atfixed points. The response rate was 97.4%. The results of thesurvey demonstrated that the Company’s strengths in terms ofcompliance culture lie in “a culture that allows lively discussion
and deliberation,” and “bosses’ management behavior,” which
creates a culture conducive to reporting, communication, andconsultation. On the other hand, we discovered vulnerabilities.
Employees felt “anxious about the outlook for the company andthe future,” and expert employees in particular had a “lack of

Anti-corruption

understanding and sharing of management policies.” These arethought to impact not only on the compliance culture but also on
employee engagement, so going forward we plan to cooperate
more than ever with each division and plant and proactively
communicate with employees. These results are reported to the
CRM Committee. Going forward, we will continue to conduct
investigations and work
to identify risks early on
and to prevent
compliance violations
before they occur.
In addition, we areworking on awarenessraising activities tofoster and instill a senseof compliance among
employees.

https://www.daido.co.jp/en/common/pdf/pages/sustainability/zosyuwai.pdf

Forthcoming initiatives
In order to continuously ensure the effectiveness of anti-bribery measures, the following measures are being taken.
Employees can also use the internal reporting system to report violations.

Already held a lecture for officers.
Started education for all employees

Due diligence of
applicable business partners,
addition of anti-bribery
provisions, etc.

(1) Top management’s
commitment(6) Training(5) Third party
management
Establishment of managed divisions,roles, communication systems, etc.

(7) Monitoring andimprovement

Established and announced
anti-bribery policy

Regular monitoring and (2) Risk based approach
regular reports tomanagement and improvements(4) Organizational
structure(3) Fundamental policies

Prioritized management ofbusiness activities ofdivisions with many
contacts with civil
servants and employees
stationed overseas
Establishing internal regulations

Company status report (FY2018 to FY2022)
The Company does not make any political contributions. In addition, there are no fines, penalties, or settlement payments
related to corrupt practices, nor have any of our employees been disciplined for corrupt practices.

Video message delivered to all employees

DAIDO STEEL GROUP INTEGRATED REPORT 2023

106

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening GovernanceStable Supply of High-quality Products

Pursuit of higher quality through participation by all

Initiatives for stable supply of high-quality products
to prevent misidentification, including in Group companies. Goingforward, we will endeavor to maintain and improve quality tocontinue to be a materials manufacturer that is a cornerstone of asafe and secure sustainable society by delivering reliable quality
to customers.

Stable supply of high-performance, high-quality materials isessential for the realization of a sustainable society. Also, stablesupply cannot be achieved without assured quality management.
Daido Steel is broadly promoting the improvement of
employees’ skills and sensitivity to quality, sharing and rolling outof examples of quality improvement and accidents, and activities

President’s quality policy“Quality is the source of businesscompetitiveness”
Keep producing goods that consumers
can use with confidence

Major quality accident index(Index taking the actual results from FY2006 as “1”)1.0●Internal education system
In order to develop human resources that support high-quality,
we maintain internal education system on quality, such as
self-management activity education and practical course on
quality investigation.
Self-management activities themes (FY2022):
Daido Steel 1,027 themes, Group companies 817 themes
Practical course on quality inspection (FY2022):
Three participants from Daido Steel, seven participants fromGroup companies with four sessions in total●Educational system by each subcommittee
In order to develop testing personnel with a high level of
specialized knowledge, the Daido Steel Group jointly organized
the Analysis Subcommittee, Non-destructive Testing
Subcommittee, and Spark Test Subcommittee in which leadersfrom the relevant inspection departments participate as a training
system for testing personnel. In addition to supporting the trainingof testing personnel, we also carry out mutual inspections
between departments and share knowledge of newtechnologies.

Analysis Subcommittee

Non-destructive Testing Subcommittee

Spark Test Subcommittee• Activities to maintain precision through mutual
analysis using the same standard samples• Study group on new analysis technology[Participation] 1 Daido plant, 4 Group companies[Frequency] Held once every three months• Activities to increase the JSNDI qualification test
pass rate through the creation of a guide• Mutual inspection of testing and calibration methods[Participation] 6 Daido plants, 11 Group companies[Frequency] Held once every three months• Periodic practical tests (maintaining skills)• Spark test competition (improving skills)• E stablishment of a working environment for spark testing[Participation] 3 Daido plants, 4 Group companies[Frequency] Held once every three months

0.8

We aim to achieve “zero major quality accidents”
based on the President’s Quality Policy so thatmaterials with assured quality management may besupplied to fulfill emerging demands in theautomotive CASE, semiconductor, and renewableenergy areas. Although improvements have been
made since fiscal 2018, we aim for zero accidents
by going back to the basics of correct procedures
and correct work.

Manufacturing with world-class QCD competitiveness

0.6

We’re aiming for even higher quality, and we’re pouring our effort into new technology.

0.4
0.2
0.0

06

07

08 09

10

11 12

13

14

15

16

17

18

19

20

21

22 (FY)

Quality management organization
The Daido Steel Group is promoting quality control improvement
measures centered on “Daido Group Quality AssuranceCommittee.” Since 2006, this committee has continued toconvene every three months, and in July 2023 it held its 69th
meeting. By sharing and rolling out information, improving
common quality issues, and introducing examples ofimprovements, the entire Daido Steel Group is attempting toprevent serious quality incidents.

<Activity examples>• Elimination of identification failures through the promotionof automation when verifying identification• Commitment to automation of tests and communication of
measurements• Quality compliance audits by the head office quality
assurance section

Board of Directors

Committee frequency: Held once every three months

Daido Group Quality Assurance Committee
Chair: Officer in charge
Members: [Daido] Eight plants, affiliated division head
[Group company] Quality assurance division head

[Daido]Eight plants,
two manufacturing divisions

Members: [Daido and Group companies] Experts from relevant inspection departments

107

DAIDO STEEL GROUP INTEGRATED REPORT 2023

(2) Survey
request/rollingout request

Roll out activities for
quality accidents

Daido Steel’s plants
Group companies

Detection of quality risks and prevention of problems in advance
Mismatched materials and identification errors must not occur,and we are working to strengthen our systems to prevent them.
We promote the machine verification of identification and thetransmission of test measurement as a Group initiative throughout
the Daido Steel Group.
●Machine verification of identification
To prevent visual verification mistakes (human errors), we haveadded bar code verification and QR code verification to many
processes. Recently, OCR reading (character recognition) has
also been used.

(4) Summary(3) C: Check
A: Action
P: Plan
D: Do

Next committee

Analysis Subcommittee
Non-destructive Testing Subcommittee
Spark Test Subcommittee(5) Report of rollout results

Administrative officefor committees

Committee

Quality Assurance
Expert Committee[Group company]
15 manufacturing companies(1) Sharing information
on quality accidents<Improvement example> Installation of automatic visualinspection equipment for forged parts
Previously, appearance inspections were done visually, but wehave installed automatic visual inspection equipment that uses
17 cameras to take images and analyze the images to instantly
and automatically determine defects, helping to prevent theoutflow of defective products.
In addition to improving quality, we were also able to improve
operating efficiency and reduce the workload caused by heavy
objects.

●Transmission of test measurements
We are promoting the transmission of test measurements toprevent manual measurement error and test scandals. If directtransmission from the test equipment is difficult due to systemconstraints, we try to avoid human intervention to the extent

possible, such as by converting the data to a QR code and thenreading it.
Existing measurement
input system

Test machine system

Direct transmission cannot be
accepted because the format is different
from the existing input system
Direct transmission 1,2,3

Measurements

1,2,3

QR code conversion
1,,2,,3,,Convert to existing input
system format and transmit
using QR code

DAIDO STEEL GROUP INTEGRATED REPORT 2023

108

Contribution to Realizing a Green Society

Introduction

Daido Steel’s Value
Creation Story

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society
Corporate Data

Strengthening Governance

Stakeholder Communication

Examples of initiatives

Promoting a wide range of SR and IR activities with the establishment of a new organization

We are working to achieve sustainable growth and improve corporate value through dialogue with stakeholders.
We will continue to provide various opportunities and aim to establish trustworthy relationships.

Stakeholder

Customer

Local communities

Shareholders andinvestors

Business partners

Employees

Main initiatives in FY2022 (New or strengthened initiatives are in bold)

Approach

We aim to be a company that is trusted bycustomers, and meet their needs with astable supply of high-quality products.

We place great importance on our
responsibility and contribution to the local
community, and we will deepen ourcommunication with local residents throughvarious events.

Content

Number of times/year (month held)• Communication through sales activities

As needed• Satisfaction surveys and individual hearings

As needed• Providing product information on the company website and at exhibitions

As needed• Implementation of plant tours

As needed• Cleaning activities around plants

As needed (Varies by plant)• Firefly viewing (Hoshizaki Plant)

Once (Jun.)• Communication with local residents through events held on plant premises

As needed• Sporting activities

Once (Dec.)• Mécénat activities (sponsoring concerts of outstanding music performers)

Four times (Sep., Oct., Nov., Dec.)• Financial results briefings for institutional investors

Four times (Apr., Jul., Oct., Jan.)• ESG Briefings

Once (Dec.)

We will work to improve communication and • Plant tour for shareholders and institutional investors
disclose accurate and timely information sothat our stakeholders can gain a deeper• IR meeting for overseas institutional investors
understanding of the Daido Steel Group.
• Publishing sponsored research reports for overseas institutional investors

In order to more completely fulfill our social
responsibilities, we promote sustainability
initiatives across our whole supply chain.

As needed
Four times (Apr., Jul., Oct., Jan.)• Exhibitor at IR events for individual investors

Three times (Twice in Aug., Sep.)• Video delivery of financial results briefings on the company website

Four times (Apr., Jul., Oct., Jan.)• Holding DSP (Daido Supplier Partnership) meetingsOnce (May)• Implementation of CSR questionnaire

Once (May)• Support for ESG activities, VA/VE, etc.

As needed• Communication within the workplace

As needed• Publishing and operation of internal newsletters (booklets, portal sites) and hearing
As neededopinions through questionnaires
It is assumed that employees will continue togrow and maximize their performance both • Internal reporting system
As needed
as a team and individuals, and we aim to• Introduction of 360 degree evaluation and feedback
Once (Mar.)build a company where employees can work
• Work satisfaction surveys
Oncewith vigor and motivation.
• Labor-management committee

Four times (Apr., Feb., twice in Mar.)• Various level-based training and self-development support

As needed

Evaluation from outside the Company
ESG evaluation institutions

Climate change: B
Water security: B

109

Shareholders: Twice (Sep., Mar.)
Institutional investors: Once (Mar.)DAIDO STEEL GROUP INTEGRATED REPORT 2023

In July 2022, we reorganized the public relations division and established a new Corporate Communication Section within the Corporate
Planning Department as a division that supervises public relations and IR activities.
The new organization’s objective is to strengthen relationships with all stakeholders and increase corporate value, and is promoting activities
such as strengthening the dissemination of corporate information, including non-financial information, and building a corporate brand.
In terms of public relations activities, we worked to strengthen the quality of press releases, build positive relationships with various media outlets,
and increase corporate awareness. For example, in March 2023, along with a press release announcing the installation of two remelting equipment (VAR)
at Chita Second Plant, we invited nine newspaper
companies to the Chita Plant and Chita Second Plant
New initiatives of FY2022
for a plant tour. Additionally, in June 2023, we acquired
Category
Content
the naming rights to “Crystal-Hiroba,” which has been
Acquirednamingrightstothe
Crystal-Hiroba
in the Sakae underground shopping center. To
popular for many years in the Sakae underground
Public relations“Daido Steel Phenix Square”
shopping center in Nagoya City, Aichi Prefecture, andPublic relations Appearance on the TV program “Unknown Gulliver”
named it “Daido Steel Phenix Square.” By doing this,we will aim to increase corporate awareness among
Video delivery on the company’s website, including financial results briefings and participation in
Individual IR
people including the young and those not involved inindividual investor corporate briefings
business.
Overseas IR
Publication of sponsored research reports (quarterly)
As for our IR activities, we have strengthened
Domestic IR
Plant tours at the Shibukawa Plant
information transmission by holding company
Domestic SR
Implementation of plant tours for individual shareholders, SR interviews for institutional investors
information briefings for individual investors andpublishing sponsored research reports for overseas
Corporate Communication Section Yoshinari Saito
institutional investors. We have also offered plant
tours and ESG information briefings as ways fordomestic institutional investors to learn about ourbusiness strategy, growth strategy, and sustainability
activities.
We will continue to enhance our IR activities byengaging in dialogue with investors through various
events.

With the establishment of the Corporate Communication
Section, we have aimed to ensure thorough information sharing
between the public relations and IR divisions and to maximize
its effectiveness. In fiscal 2022, we have implemented new
initiatives and are gradually seeing results. We will engage in awide range of public relations activities in fiscal 2023. As part of
our IR efforts, we would like to plan and participate in a numberof events in order to achieve synergistic benefits.

Group expansion of sustainability activities
The Daido Steel Group works together to expand programs that spread information on a range of sustainability-related topics.
Example of a meeting with participation of Group companies
Name

Objective

Daido Steel Group Environmental Liaison Meeting

Information sharing and risk communication regarding environmental issues and initiatives of each company.

Daido Steel Group Liaison Meeting for CO2 Emissions Reduction Promotion

Information sharing and risk communication regarding CO2 emission reduction and initiatives of each company.

Affiliate Safety Promotion Committee
Safety Research Meetings and Safety Study Sessions

We will share concerns and safety issues in various work processes, discuss measures, and work on disasterand accident prevention activities.

Group CRM study sessions and Seven Subcommittee Activities

We will work to strengthen the Group-wide risk management system and improve the effectiveness of its
operations by conducting education and research by theme area and mutual information exchange activities.

Daido Group Quality Assurance Committee

The committee shares and rolls out information on serious quality incidents, improves common quality issues,
introduces examples of improvements, and makes quality improvements for the entire Daido Steel Group.

Participation in, and endorsement of initiatives in and out of Japan
Certification of public institutions

Aichi Family-friendly
Company

Ministry of Economy,
Trade and Industry“GX League Basic
Concept”

Japan Keidanren“Challenge to 30%
by 2030”

Administrative office:Ministry of theEnvironment “30by30
Alliance for Biodiversity”

World Steel Association“Sustainability Charter”

Task Force on Climate-related
Financial Disclosures

United Nations“Global Compact”

DAIDO STEEL GROUP INTEGRATED REPORT 2023

110

Corporate Data

Daido Steel’s Value
Creation Story

Introduction

Innovation to Realize a
Green Society

Contribution to Realizing a
Green Society

Corporate Data

Ten-year Financial Summary(Millions of yen)

Years ended March 31

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

Net sales

457,731483,633

460,577445,122505,219543,255

490,421412,722529,667

578,564

Operating income

18,977

20,40824,43225,51336,21833,81524,768

10,07036,982

46,986

Ordinary income

20,287

21,72925,10826,37336,13034,34324,29812,642

39,20048,122

Profit attributable to owners of parent

12,616

10,886

6,746

16,38623,92021,182

10,987

4,516

26,89436,438R&D expenses

5,160

5,300

5,766

6,205

5,419

5,638

6,002

4,722

5,785

6,255

Capital investment (plan)

26,40020,60028,30032,80038,60037,20025,30012,50025,50034,900Capital investment (construction)

44,40430,29523,20528,94035,60534,41337,52924,44821,02724,284

Depreciation

20,052

22,43622,454

23,27520,74023,171

24,662

25,912

26,797

26,054

Total assets

557,522588,590535,675

574,169

642,021650,697625,899

665,506

728,187

773,851

Equity232,153

256,021232,832

259,851

284,435

285,508

273,561

303,143

329,713368,718

Net assets

267,625

292,405

268,345

290,501

316,409318,140

309,136

339,353

365,004

405,479

Interest-bearing debt

143,085

146,208

136,114

142,599

160,352

174,998

193,881

198,812229,090236,761

Net cash provided by (used in) operating activities

28,56725,73945,731

28,39031,043

28,114

41,03333,766(16,684)

22,634

Net cash provided by (used in) investing activities(34,313)(32,178)(23,164)(26,449)(30,215)(33,707)(39,326)(29,395)(14,568)(20,084)

Net cash provided by (used in) financing activities(7,633)(2,792)(20,164)(1,843)

5,477

5,589

10,526

2,999

19,402(2,668)

Net assets per share

535

590

545

609

6,672

6,697

6,417

7,111

7,735

8,650

Profit attributable to owners of parent per share

29

25

16

39

561

497

258

106

631

855

Equity ratio (%)

41.6

43.5

43.5

45.3

44.3

43.9

43.7

45.6

45.3

47.6

Return on sales (ROS) (%)

4.1

4.2

5.3

5.7

7.2

6.2

5.1

2.4

7.0

8.1

Return on assets (ROA) (%)

3.8

3.8

4.5

4.8

5.9

5.3

3.8

2.0

5.6

6.4

Return on equity (ROE) (%)

5.7

4.5

2.8

6.7

8.8

7.4

3.9

1.6

8.5

10.4

Cash dividends applicable to the year per share (yen)

5.0

6.5

7.5

10.0

Interim 6.0
Year-end 60.0*

130.0

70.0

35.0

180.0

230.0

Specialty steel

250,749

262,438

254,150

228,963

254,808

278,924

241,462

198,218

267,310

290,458

High-performance materials and magnetic materials

159,367

178,513

172,786

163,495

186,809202,357

181,038

161,254

212,319

237,373

Parts for automobile and industrial equipment

123,776

130,293

131,078

120,331130,807

137,839

120,933

100,355

120,980

135,891<Net sales by segment>

Engineering

31,98025,43628,60925,587

26,97429,34027,492

21,25918,644

19,556

Trading and service

18,85621,08919,612

24,047

25,61225,962

31,52928,95438,872

41,104(Elimination of intercompany sales)(127,000)(134,137)(145,659)(117,304)(119,793)(131,168)(112,033)(97,320)(128,459)(145,819)

Specialty steel

1,691

3,177

7,560

5,813

6,478

5,998

5,148

(2,632)

3,827

9,771

<Operating income by segment>
High-performance materials and magnetic materials

11,104

13,517

12,331

17,41622,195

20,694

13,638

12,172

26,65024,286

Parts for automobile and industrial equipment

3,779

1,023

1,298

(516)

3,070

2,308

430

(2,109)

4,979

8,217

Engineering

1,125

1,652

2,071

1,218

1,835

2,291

2,960

858

(1,277)

1,425

Trading and service

1,280

1,043

1,173

1,583

2,686

2,527

2,581

1,786

2,834

3,293

(3)

(6)

(2)

(2)

(48)

(5)

9

(4)

(31)

(8)

(Elimination of intercompany income or loss)* A one-for-ten reverse stock split of common shares was conducted on October 1, 2017.

111

DAIDO STEEL GROUP INTEGRATED REPORT 2023

DAIDO STEEL GROUP INTEGRATED REPORT 2023

112

Innovation to Realize a
Green Society

Introduction

Company Overview

List of Group Companies

Corporate name: Daido Steel Co., Ltd.
Founded: August 19, 1916

Principal banks: Mizuho Bank, Ltd., MUFG Bank, Ltd.,
Mitsubishi UFJ Trust and Banking Corporation
Lead managers: SMBC Nikko Securities Inc., Mizuho Securities
Co., Ltd., Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.,
Nomura Securities Co., Ltd., Daiwa Securities Co. Ltd.

Incorporated: February 1, 1950
President: Tetsuya Shimizu
Number of employees (Non-consolidated):
3,283 (As of March 31, 2023)
Common stock: ¥37,172,464,289
Number of issued shares: 43,448,769 (As of March 31, 2023)
Number of shareholders: 19,449 (As of March 31, 2023)

Contribution to Realizing a
Green Society(As of March 31, 2023)

Number of
employees

Name of company

Corporate Data

Location

Corporate website address

Specialty Steel
Daido Die & Mold Steel Solutions Co., Ltd.

499

Daito, Osaka

http://www.daidodms.co.jp/en/

DAIDO DMS MALAYSIA SDN. BHD.

114

Selangor, Malaysia

https://www.daidoamistar.com.my

DAIDO DMS SINGAPORE PTE. LTD.

20

Singapore–Principal business partners:

DAIDO DMS (THAILAND) CO., LTD.

210

Chachoengsao, Thailand

https://www.daidopdm.co.th<Sales> Nissan Motor Co., Ltd., Honda Motor Co., Ltd., Toyota
Motor Corporation, DENSO Corporation, Mitsubishi Heavy
Industries, Ltd., IHI Corporation, Nidec Corporation

Daido Tienwen Steel Co., Ltd.

146

Taoyuan-Hsien, Taiwan

https://www.daidosteel.com.tw

Daido Technica Co., Ltd.

661

Tokai, Aichi

https://www.daido-technica.co.jp

Daido EcoMet Co., Ltd.

163

Tokai, Aichi

http://www.d-ecomet.co.jp

Riken Seiko Co., Ltd.*251

Chuo-ku, Tokyo

https://www.rkn.co.jp

Tohoku Steel Co., Ltd.*

394

Murata-machi, Shibata-gun, Miyagi https://www.tohokusteel.com/en/

Maruta Transport Co., Ltd.*

479

Mizuho-ku, Nagoya

https://www.maruta.co.jp

Sakurai Kosan Co., Ltd.*

67

Minami-ku, Nagoya

http://www.sakuraikosan.co.jp

Izumi Denki Kogyo Co., Ltd.*

47

Sumida-ku, Tokyo

http://www.izumidenki.com

Kawaichi Sangyo Co., Ltd.*

183

Kawasaki-ku, Kawasaki

http://www.kawaichi.jp

Nippon Seisen Co., Ltd.

694

Chuo-ku, Osaka

https://www.n-seisen.co.jp/en/

THAI SEISEN CO., LTD.

202

Samutprakarn, Thailand–

Shimomura Tokushu Seiko Co., Ltd.

295

Ichikawa, Chiba

http://www.sts-shimomura.com/en/

Shimomura Tokushu Seiko (Suzhou) Co., Ltd.

55

Jiangsu Province, China

https://www.stss-shimomura.cn

ORIENTAL SHIMOMURA DRAWING (M) SDN. BHD.

65

Penang, Malaysia–

Daido Shimomura Steel Manufacturing (Thailand) Co., Ltd.

27

Chonburi, Thailand–

Daido Electronics Co., Ltd.

261

Nakatsugawa, Gifu

http://www.daido-electronics.co.jp/english/

Daido Electronics (GuangDong) Co., Ltd.

67

Guangdong Province, China–

Daido Electronics (Suzhou) Co., Ltd.

350

Jiangsu Province, China–

Daido Electronics (Thailand) Co., Ltd.

443

Ayutthaya, Thailand–

Nissei Seiko Co., Ltd.

61

Minami-ku, Nagoya

https://www.nssy.co.jp/english/index.html

FUJI OOZX Inc.

635

Kikugawa, Shizuoka

https://www.oozx.co.jp/en/

FUJI VALVE (GUANGDONG) CORPORATION

160

Guangdong Province, China–

PT. FUJI OOZX INDONESIA

198

West Java, Indonesia–

FUJI OOZX MEXICO, S.A. DE C.V.

132

Guanajuato, Mexico–

Daido Castings Co., Ltd.

445

Minato-ku, Nagoya

http://www.d-cast.jp

Daido Precision Industries Ltd.

228

Toshima-ku, Tokyo

https://www.daidoseimitu.co.jp/e/index.htm

Toyo Sangyo Co., Ltd.

74

Ohira-mura, Kurokawa-gun, Miyagi https://www.ring-roll-toyo.co.jp/

Japan Drop Forge Co., Ltd.

127

Amagasaki, Hyogo

https://www.j-d-f.co.jp

OHIO STAR FORGE CO.

129

Ohio, U.S.A.

http://www.ohiostar.com

Daido Steel (Thailand) Co., Ltd.

58

Chonburi, Thailand–

Daido Star Techno Co., Ltd.

276

Shibukawa, Gunma

http://www.dsteku.jp

Daido Machinery Co., Ltd.

316

Minami-ku, Nagoya

http://www.dm-daido.co.jp/english/

Daido Environment Engineering Co., Ltd.

55

Minami-ku, Nagoya

http://www.daido-kankyo.co.jp

Daido Plant Industries Co., Ltd.

66

Minami-ku, Nagoya

https://www.daido-plant.co.jp/en/index.html

Daido Kogyo Co., Ltd.

337

Minato-ku, Tokyo

https://www.daidokogyo.co.jp/english/

Daido Kogyo (Thailand) Co., Ltd.

20

Bangkok, Thailand–

Daido Steel (America) Inc.

10

Illinois, U.S.A.

–

Daido Steel (Shanghai) Co., Ltd.

46

Shanghai, China–

Daido Steel Materials Technology Shanghai Co., Ltd.

13

Shanghai, China–

Daido IT Solutions Co., Ltd.

212

Higashi-ku, Nagoya

https://www.daido-its.co.jp/

Daido Bunseki Research, Inc.

207

Minami-ku, Nagoya

https://www.daido.co.jp/dbr/en/index.html

Daido Life Service Co., Ltd.

412

Minami-ku, Nagoya

https://www.daidolife.co.jp

Kisokoma Heights Co., Ltd.

36

Kiso-machi, Kiso-gun, Nagano

http://www.kisokoma.co.jp

Silent partnership with TAKAKURA FUNDING CORPORATION LTD. as business operator–

Chiyoda-ku, Tokyo–<Procurement> Chubu Electric Power Co., Inc., TOHO GASCo., Ltd., Obayashi Corporation, Sumitomo Metal Mining Co.,
Ltd., MM&KENZAI Corporation, HANWA Co., Ltd.

High-performance Materials and Magnetic Materials

Principal shareholders:
Investment in the Company
Name of shareholder

The Master Trust Bank of Japan, Ltd. (Trust Account)
NIPPON STEEL CORPORATION
Custody Bank of Japan, Ltd. (Trust Account)
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
NHK SPRING CO., LTD.
Honda Motor Co., Ltd.
MUFG Bank, Ltd.

Number of shares held
(thousands of shares)
4,124
3,100
2,418
2,075
1,577
1,449
1,305
1,214

Investment ratio (%)
9.67
7.27
5.67
4.86
3.69
3.40
3.06
2.84

Toyota Motor Corporation

869

2.03

Nippon Steel Kowa Real Estate Co., Ltd.

749

1.75

Note: Excluding treasury stock

Parts for Automobile and Industrial Equipment

Engineering

Trading and Service

23 other companies

113

Daido Steel’s Value
Creation Story

Corporate Data

DAIDO STEEL GROUP INTEGRATED REPORT 2023

Unmarked: Consolidated subsidiary * Associated company accounted for by the equity method

DAIDO STEEL GROUP INTEGRATED REPORT 2023

114

Head OfficeUrbannet Nagoya Building, 1-10, Higashisakura 1-chome, Higashi-ku, Nagoya,
Aichi, 461-8581, Japan
TEL: 81-52-963-7501 FAX: 81-52-963-4386
Tokyo Head Office
Daido Shinagawa Building, 6-35, Konan 1-chome, Minato-ku, Tokyo, 108-8478, Japan
TEL: 81-3-5495-1253 FAX: 81-3-5495-6733

Please let us hear your opinions about the Integrated Report 2023.
We will refer to your opinions and comments for future reference.
For inquiries:
ESG Management Department

TEL: 81-52-963-7512

FAX: 81-52-963-4386

https://www.daido.co.jp/en/ask/about.html?type=profile

Please refrain from unauthorized reproduction or use of the contents of this material.

Published in September 2023