Message from the President

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Thinking about the Modelfor Future Business
While revenue from our organic chemicals business is steadily increasing, our inorganic chemicals
business is struggling due to factors such as rising raw material and fuel costs, indicating that the time
has come to reconsider the model for our business. However, despite these challenges, we remain acompany possessed of real ability and strength. “Purpose” will be the guiding compass in determining
our future direction, and we will leverage our technological strength, which is our greatest strength, tocontinue providing the world with products which improve people’s lives.
Executive Director and President

Hideo Takahashi

07Message from the President

About ISK

Our Aims
Organic chemicals business

Efficiently scale up production to achieve cost-competitivenessInorganic chemicals business

Perform a ground-up reconsideration of the ideal state for the Yokkaichi Plant

New businessRealize new business led by the Business Creation Committee

Environment

Reduce Group CO2 emissions (Scope 1 and Scope 2)
30% by 2030 compared to fiscal 2019

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Business Environment

Business Management Affected by the Weight of Global Changes
The business landscape for the ISK Group has changed significantly over the past three years. Fiscal 2021 saw the start of arecovery from the stagnation caused by the COVID-19 pandemic, with demand for titanium dioxide recovering particularly in theautomotive and construction sectors. While we hoped this situation would last for a while longer, starting in fiscal 2022/ various
factors appeared which continue to create an extremely difficult business environment; these include a tightening of supply anddemand for semiconductors, production adjustments among automakers, who are major customers of titanium dioxide for paint,
China and Asia’s worsening economic conditions, and rising resource prices caused by the prolonged Russia-Ukraine conflict.
In the midst of all this, other challenges, such as competition with titanium metal manufacturers, have caused raw titanium ore
prices to soar. Although we have raised product prices, this has not been enough to fully absorb the increase in raw material andfuel costs, thus putting pressure on profits. In contrast to this, our organic chemicals business has been growing, particularly insales of fungicides and other flagship agrochemicals to the South American market as grain production centered on the Americas
continues to grow due to stable food demand. As for our highly anticipated upcoming flagship products also, sales of our new

Our Efforts

herbicide expanded in the Americas, while sales of our new insecticide were strong in all countries. Thanks in part to favorable

Ongoing Consideration of Our Future Direction for the Sake ofRealizing Better Living Environments

weather conditions and a weaker yen over the past few years, we have been able to generate significant profits which have

It has been three years since my appointment as president. In that time, ISK Group has undertaken a variety of efforts aimed atallowed our organic chemicals business to fundamentally support our overall performance. However, I believe that achievement of
Vision 2030 will require a fundamental rethinking of our business structure which includes new business.

achieving our long-term vision, Vision 2030, and medium-term business plan, Vision 2030 Stage I (fiscal 2021–2023). Instead ofa traditional, “defensive management” approach, I continue to encourage employees to be proactive, welcoming their ideas andsuggestions. Also, in order to promote widespread awareness of Vision 2030, I visited each of our business sites in Japan where
I held employee orientations. Perhaps as a result of this, I have noticed an increasingly positive and proactive mood taking holdin the company.
I have also worked to instill a widespread importance of “Purpose.” I am continually reminding employees to stay focused on
why our company exists and what we are contributing. This mindset helps us, when they run up against a wall, to stay aware of,and focused on, the direction forward. We are not just about making and selling things for profit. I want us to always be thinking
seriously about what direction we can take in order to improve people’s living environments through chemical technology.
And by spreading to those outside the company that this is the sort of company we are, it will help us in securing higher quality
human resources and to being seen as an attractive investment choice amongst investors.

08

Message from the President

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Medium-term Business Plan, Vision 2030 Stage I

Inorganic Chemicals Business

Expected Failure to Meet Profit Targets Due to Business Environmental Changes,
Despite Achievement of Sales Targets

Struggling with Rising Raw Material and Fuel Costs andTackling the Challenge of Switching to Highly Functional, High-Value-Added Products

In the midst of all this, the ISK Group arrives at the last year of Stage I in fiscal 2023. In the first year, fiscal 2021, we achieved our target

In our inorganic chemicals business, the primary challenge we have is to shift our product lineup from general-purpose products to highly

values in net sales, operating income, ROE and other metrics, but, due to business environmental changes discussed earlier, we did notfunctional, high-value-added products. To achieve this, we are focusing on establishing a mass production system and on developing

meet our profit targets for fiscal 2022. We expect that the business environment will continue to be severe throughout fiscal 2023 as

new products. Our target is for 40% of sales to come from highly functional, high-value-added products. We have been unable to reachwell; nevertheless, we are doing all we can to reach our performance targets.

this target because price revisions caused by the weaker yen and higher cost of raw materials have expanded sales of general-purpose
products. Also, despite an increase in sales, we had negative profit due to soaring raw material and fuel prices which caused cost
increases to exceed price increases.

Organic Chemicals Business

The Americas Tops Regional Sales of Agrochemicals

Electronic component materials including barium titanate and its raw material, high-purity titanium dioxide, are currently undergoinginventory adjustment.
However, as the market for multilayer ceramic capacitors (MLCC), which are the main application for them, is expected to grow steadily

During this time, ISK Group has been focused on priority measures in each of our businesses. For example, in agrochemicals businesswith the anticipated shift to electric vehicles, so that demand for our electronic component materials is expected to steadily increase.

our priority is cost reduction. Due to the nature of this business, it is not possible to continuously bring new agrochemicals to market

For the manufacture of barium titanate, we have established MF Material (Nobeoka City, Miyazaki Prefecture) as a joint venture among

within a short period of time. In fact, because new agrochemicals are expected to be released to the market in several years’ time,

three companies: Murata Manufacturing Co., Ltd., which is the largest manufacturer of MLCC, ISK and subsidiary of ISK, Fuji Titanium

we must work to maintain and grow our market share by creating mixed formulations of existing agrochemicals or changing them toIndustry, barium titanate manufacturer. The new plant is scheduled to start operation in 2027, with the main goals being quality

new, easy-to-use dosage forms, or by expanding the scope of applicable crops or the sales regions. The key to achieving all of this isstabilization and manufacturing cost reduction. We would like to tackle the challenge of process improvement while sharing the know-

cost-competitiveness. Even newly developed agrochemicals will eventually face price competition from generic products; hence, cost

how that have been cultivated in each company up to date.

direction will be fundamentally affected by advancement in production technology and how smoothly you can scale up production. One
measure we have decided upon in order to achieve production innovation is the establishment of the Organic Production Technology
Research Institute (provisional name) in Ono City, Hyogo Prefecture. We are currently preparing for the start of full-scale operations in

Yokkaichi Plant

the fall of 2025.

A Plant with a High Profit Margin Which is Capable of Adapting to Market Changes

In addition, significant changes in regional sales have had an epoch-making impact on our agrochemicals business. Until last year,

I do not believe that the current rise in raw material and fuel prices is a temporary phenomenon. Neither do I believe that titanium ore

Europe had been the region which accounted for the majority of our sales, but, for this fiscal year, there has been an expansion in sales

will return to its previous price, given the structure of the market, which is dominated by major ore companies. In order to ensure stable

centered on new products, namely herbicides in the North American market and fungicides in the South American market, which has

profits within a business environment subject to exchange rate and supply and demand trends, we must reconsider the very model that

put the Americas at the top for regional sales. To achieve this reversal while still increasing sales in Europe is, in my opinion, a significant

we use for inorganic chemicals business, which has been focused on general-purpose products. Thus, in May 2023, we establishedaccomplishment.

the Committee for Inorganic Business Restructuring to begin an unrestricted discussion that left no option off the table about how to

For animal health products, our anti-inflammatory agent for acute canine pancreatitis, BRENDA™, which is well-received in Japan,transform our inorganic chemicals business model and reorganize our mainstay Yokkaichi Plant from the ground up. It just so happens

obtained conditional approval* from the United States’ Food and Drug Administration (FDA) in the fall of 2022 and was released tothat the Yokkaichi Plant has been in operation for more than 80 years and is at a point where it will need updates to its buildings andmarket in America in April 2023 as PANOQUELL™-CA1. It has been well-received since its release and has been steadily growing in

production equipment. I want to make sure that the plant is ready for these changes.

sales. If the ongoing clinical trials confirm the drug’s effectiveness and it becomes fully approved, we can expect to see even greater

At ISK, we have technology which allows us to change the size and shape of titanium dioxide particles, and this has led to the creation

market penetration. In addition, we are moving forward with securing approval and pursuing commercialization in Europe and other major

numerous products which only we can manufacture. One example is a paint that achieves a glossy, pearly white color by changing thecountries and territories; so, looking ahead to the future, we can expect to see billions of yen in sales. I believe this is a great opportunity.

shape of the particles into a plate-like form. Only ISK is able to utilize titanium dioxide to produce such metallic or pearl colors. In addition,*A system whereby new drug candidates for serious diseases for which no effective treatment exists can be approved without waiting for the results ofclinical trials if they meet indicators of predicted therapeutic efficacy.

09Message from the President

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

we successfully manufacture conductive materials necessary for antistatic property and heat shieling pigments that contributes to energy

the perspective of our current business, “enclaves” in completely new areas. What problems does the world face, and what problems

savings by our proprietary technology to make titanium dioxide in rod-like form. The profit margin for these products is high.

people think would be worth paying money to solve? We are out in the field investigating, coming up with hypotheses and then trying toSome are of the opinion that we should also be producing high-value-added products alongside general products, but I think we are atverify those hypotheses.

a serious crossroads in terms of deciding whether we can continue to do both while raw material and fuel prices continue to climb. If

Although we have been doing this for a year now, and although we have come up with a number of proposals, the fact is we have notthat the plant does not have the strength to produce at least somewhat profitable products, it will be difficult to achieve stable growth

yet been able to evaluate their commercial feasibility. During the Stage II period we will examine how to achieve the proposals and willin profits moving forward. The production equipment required at the processing and finishing stages differs between general-purpose

then work to realize them during the subsequent medium-term business plan, Vision 2030 Stage III (fiscal 2027 to 2029). And, looking

products and high-value-added products. We are working to reach a decision within the next six months or so and will incorporate thisahead, We will strengthen our activity by inviting new employees and mid-career hires with a wide range of backgrounds, both organic

direction into Vision 2030 Stage II, the next medium-term business plan (fiscal 2024 to 2026).

and inorganic chemistry, to participate.

ESG

Value of ISK

Considering Joint Action with the Companies of the Yokkaichi Industrial Complex

Fostering Expectations about the Future Potential to Increase Share Price

CO2 emissions reduction will be a major challenge for restructuring of the Yokkaichi Plant. ISK has announced that it will reduce

Looking at the world in recent years often makes me wonder if we have reached a turning point. There may be ups and down, but things

CO2 emissions 30% by 2030 compared to fiscal 2019, and we are proceeding with installation of backup boilers as we look to

return to normal eventually; however, when fundamental changes occur, there is no going back to normal. So, what do you do whenswitch our fuel source from coal to LNG. Further, we are monitoring technological trends as we explore options for equipment

things do not go according to plan? Certainly, it is important to anticipate and prepare for the worst-case scenario.

which emits less CO2 and develop materials capable of CO2 fixation.

But I believe our company has the underlying strength to overcome such a scenario. In our organic chemicals business, we have theAlso, at the Yokkaichi Industrial Complex, where the Yokkaichi Plant is located, a proposal has been put forward for joint action

ability to develop environmentally conscious agrochemicals, as well as the ability to adapt them to different countries’ administrative andto achieve carbon neutrality among the companies there. Starting this fiscal year, the Yokkaichi Petrochemical Complex Carbon

regulatory requirements so that they can be successfully licensed and brought to market. In our inorganic chemicals business, we have

Neutrality Promotion Committee was established to work on facilitating cooperation between the industrial complex companies

the ability to develop materials which perform a variety of different functions. The value of the ISK Group is found in its technologicaland the government to address issues that are difficult for companies to address on their own. ISK is also participating in relevant

capacity for producing things that people want in order to create better living environments. I want all of our employees and stakeholders

subcommittees and contributing to discussions about new fuel sources and infrastructure development.

to recognize us a company possessed of real ability and strength, no matter the challenge.

In addition, with regard to ESG, we are moving forward in stages with initiatives related to human rights due diligence and human

The Tokyo Stock Exchange is asking all companies with a PBR (price book-value ratio) of less than 1x to disclose what improvement

capital management. In March 2023, ISK received certification as a Health & Productivity Management Outstanding Organization

measures they are taking, and, while our PBR is holding at just above 0.5x, I feel that a challenge for us will be fostering expectations(large enterprise category) from the Ministry of Economy, Trade and Industry. We will continue to maintain a grounded approach

about the future potential of ISK, as a company possessed of real ability and strength, which will lead to a higher share price.

as we work to enhance and expand our efforts.

Therefore, as we work to increase our operating margin, I would like to focus more on communicating the growth scenario already laidout in Vision 2030. In addition, we changed our shareholder return policy in November of last year. Aiming for a consolidated payout ratioof 30%, and with a year-end dividend forecast of 50 yen for fiscal 2023, our policy is to utilize flexible share buybacks and other means

New Businessesof achieving a further increase in the total return ratio.

Goals for Realization in Fiscal 2027 and Beyond

Thank you to everyone for your continued support and understanding.

In the previous Integrated Report, I announced that the key priorities during my term as president, in addition to the restructuring of
the Yokkaichi Plant, the launching of new business. It is common practice when launching new business to take stock of company’s
strengths; however, the Business Creation Committee, which I directly oversee, has been tasked with finding business seeds in, from10

Vision 2030

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

To Realize Our Corporate Purpose
Our long-term vision, Vision 2030, has the dual aims of raising our corporate value through business activities and realizing a sustainable society.
In line with the ISK Group’s corporate purpose, we will continue to bring the world products that make people’s lives better.

Vision 2030 Management Targets

Originality. Acceleration. Global Reach.
Transforming Lives Throughthe Power of Chemistry.

• Net sales of greater than 200 billion yen • Operating margin of 15% or more • ROE 10% or more • Continued stable return for shareholders
Contributing to realization of a sustainable society together with improving our corporate value through such business activities.

Preconditions: Megatrends and Stakeholders

Megatrends

Vision 2030 presupposes numerous worldwide changes that will likely arise by 2030, including climate change and food problems.

Climate change
Resource shortages and food problems
Urbanization
Rapid development of IT
Growth and aging of the global population

How will these changes affect our stakeholders such as customers, shareholders, and investors? How can we contribute to ourstakeholders in the face of these changes? After much debate in-house, we have summarized the initiatives that must be taken
in our various businesses.

Value Provided by ISK and Our Initiatives
Inorganic chemicals business

Stakeholders

Shareholders and investors
Local communities
Customers and business partners
Employees

Organic chemicals business

Create new value based on the technologies developed for titanium dioxide products, to support the environment and digital

Supply unique products that directly enhance customer value across the world, and support people’s nutrition, health and life tosociety, and contribute to realizing a sustainable society.

contribute to realizing a sustainable society.

Titanium dioxide
Functional materials
Environmental products

Providing a variety of colors and hues
Creating a range of comfort
Achieving both innovation and environmental protection-> Diversifying the optical propaties of titanium dioxide to realize new value creation-> Contributing to the resolution of social issues such as the adoption of information and communications technologies andthe electrification of automobiles through functional materials-> Reducing environmental impacts while streamlining production through a revolution in production structures

Agrochemicals
Animal health products
Pharmaceuticals

Improving agricultural production stability and quality
Protecting the lives and health of pets
Contributing to medical care-> Pursuing development and commercialization in a way that’s aware of the value chain-> Accelerating the creation of value and restoring our growth trajectory by improving and evolving in-house technologies-> Manufacturing flagship products at the lowest cost in the world and supplying them in a stable manner to customers

New businesses, others-> Building a new business portfolio-> Strengthening development of environmentally friendly products by investing resources (people and money) with an awareness of environmental, social, and corporate governance (ESG) considerations in areas other than titanium dioxide or agrochemicals-> Establishing structures to pursue carbon neutrality by 2050

11

Progress in Vision 2030 Stage Ⅰ

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

To Realize Our Corporate Purpose
We are pursuing numerous initiatives under Vision 2030 Stage I (fiscal 2021 to 2023), the basic policy of which is the creation of sustainable corporate value.
Below are our priority goals and the current state of each.

Inorganic Chemicals Business

Organic Chemicals BusinessPriority goals

Main initiatives

Increasing the sales ratio for highly functional,
high-value-added products

Priority goals

The increased sales ratio for these products, stated in the goals of the medium-term businessplan, was not achieved due to expanded sales of general products. However, sales of highly functional, high-value-added products are steadily increasing with each year.

(Electronic component materials) Sales are increasing for in-vehicle and telecommunications products.
Expanding sales of high-purity materials for electronic(Electro-conductive materials) Performance has been robust, and sales are expected to increase in autocomponents, and electro-conductive materials
motive applications and specialty inks.

Main initiatives

Increasing our share of the global market by manufacturing The new factory of a subcontractor in India (agrochemical active ingredients) has started operation.
agrochemical active ingredients at the lowest cost in the
The Americas has dramatically improved its sales composition ratio and has overtaken Europe to become top
world and supplying them in a stable mannerin the ISK Group.
Reducing costs and increasing demand for upcoming
flagship agrochemical products

Sales are growing steadily, mainly in the Americas.

Accelerating development of new products that willserve as drivers of further growth(High-refractive-index material) We are in the process of providing samples in Japan and having them evaluated.
(Bismuth sulfide pigments) There are increasing requests for samples to use in optical elements, and we are
studying how to scale up production.

Implementing strategic, innovative sales measures,for example by utilizing multiple sales companies

Good progress is being made in the Americas and Europe, for example.

Procuring feedstock ore in stable and favorable terms

We are making progress in favorable procurement of numerous types and quantities of ore while
maintaining product quality.

Acquiring and maintaining agrochemical registrations
in various countries worldwide

We are in the process of acquiring agrochemicals registration for upcoming flagship agrochemical products in various countries.

Reducing waste,
reducing equipment maintenance costs

We are in the process of achieving materiality KPIs.

Developing and commercializing biorational products

Swaru-banker™ Long, a new natural enemies biopesticide, was launched.
ISK’s first biostimulant product (plant-based) went on sale.

Launching a master plan to optimize
manufacturing sites

We are studying a reform of production structure, which includes scrap and build, with the aim ofachieving sustainable plants that save energy, resources, and labor.

Refining and passing on
chemical synthesis technologies

We purchased land for a new ISK pilot plant in Ono City, Hyogo Prefecture.

Creating a roadmap to reduce greenhouse gases

We are drawing a roadmap towards carbon neutrality.

Introducing anti-pancreatitis drug for dogs
to worldwide markets

Our anti-pancreatitis drug for dogs received conditional approval from the Food and Drug
Administration (FDA), in the U.S. and went on sale there.

Organic and Inorganic Chemicals Businesses
Priority goals
Growing our top line (sales)

Main initiatives

Capital policy
Priority goals

Overall management
Main initiatives

Sales are exceeding our initial plan.

A Business Creation Committee, which reports directly to theStrengthening creation ofpresident, was established.
new businesses and new productsBlue phalaenopsis went on sale in Japan.
We established our corporate purpose and are raising awareness
Carrying out internal structural andof it company-wide.
awareness reforms to achieve
Top management is communicating through president briefings
the Vision 2030 goals
and media such as the Integrated Report and in-house magazine.

Strengthening shareholder return(continuing to pay stable dividends)

Aggressively pursuing capital cost management
Realizing improvements throughout
the cash conversion cycle, etc.

Priority goals

Main initiatives

Expanding the business opportunities available to us throughmanagement from the perspective of ESG and the SDGs
In November 2022, we changed our shareholder return policy in consideration of thetotal return ratio.

Identifying materialities (SDGs) and strengthening initiatives toaddress them

By improving our long-term issuer rating, weare improving the environment for procuring
capital.

Continuing and strengthening compliance management

Reforming workstyles by pursuing the digital transformation (DX)and streamlining operations

We are steadily implementing
initiatives, centering on KPIs,
that we have planned relating towhat we consider the mostimportant issues (materiality),such as climate change andhuman capital.

Strengthening risk management

12Message from the Director of Finance & Accounting Headquarters

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Reducing Volatility and Increasing Earning Capacity through Structural Reforms
the unusual step of raising product prices twice in a year for two consecutive years, thistitanium dioxide for ISK; however, exports to the Chinese market continue to be sluggish.

was not enough to pass on the rising raw material and fuel costs, resulting in negative

It is likely that we will struggle for the remainder of this year. There is talk of economic

operating income.

stimulus measures being enacted, but the details and scope of such measures are

Market conditions also worsened. The domestic market was affected by production

unknown, so it is unclear how much we can expect from them.

adjustments in the automobile industry which were implemented because of a shortage

This situation is reflected in the forecast consolidated performance of 147.0 billionof semiconductors. In the overseas market as well, the slowdown in the Chinese

yen in net sales, 11.0 billion yen in operating income and 7.5 billion yen in net income

economy, particularly the declining demand for construction due to a slump in theannounced in May 2023. If nothing tangible is seen with regard to China's economic

real estate industry, has driven down prices for titanium dioxide used in architectural

stimulus measures by the end of the year, a downward revision is possible.

paints, and, with surplus inventory flowing into the Southeast Asian market, the overseas

Fiscal 2023 is the final year of medium-term business plan, Vision 2030 Stage I (fiscal

market as a whole fallen into a low-price war. The ISK Group tried to adapt to this, but

2021 to 2023), and, although consolidated sales are expected to surpass the target of

was not at a price level that would allow it to compete.

125.0 billion yen, it is not expected that we will meet any of our profit targets, including

As a result of all of the preceding factors, our consolidated performance for fiscal 2022

our 16.6 billion yen consolidated operating income target. ROE is also expected to beshows an increase in revenue but a drop in profit.

7.5%, which will unfortunately fall short of the target of 10% or more. However, given

Rising raw material prices are also negatively impacting cash flow through increased

that our organic chemicals business is currently doing well, and given that the yen has

inventory burdens. The 40 - 60% increase in raw material prices has been accompanied

weakened more than expected against the dollar and the euro, we can expect to see

Market Conditions and Performance Results for Fiscal 2022

by an increase in the inventory amount recorded on the balance sheet. This was a large

some degree of improvement.

Strong Organic Business
While Inorganic Chemicals Business Struggled

burden which resulted in negative operating cash flow for fiscal 2022.

Sales were extremely strong for our organic chemicals business. In particular, sales

Outlook for Fiscal 2023

Director of Finance &Accounting Headquarters

Yasunobu Kawazoe

of fungicides and herbicides grew significantly in the Americas, notably becoming theProfit Emphasis and Structural Reform

Prioritizing ROE Improvement and Pursuing “Selection andConcentration” with the Next Medium-term Business Plan

previously been the top region, remained strong, but sales in the Americas exceeded

Failure to Meet Medium-term
Business Plan Profit Targets

even that. Sales increased by 15.4 billion yen, boosted in no small part by the weakerIn fiscal 2023, our organic chemicals business, in particular agrochemicals, is continuing

and this is the direction of discussion among the Board of Directors. Rather than net

yen.

to perform well thanks to ongoing market vitality. In Europe, we have also received asales, the indicator to focus on is the absolute value of operating income. Our long-term

Sales in our healthcare business also grew year-on-year. Additionally, PANOQUELL™-

tailwind boost from the expiration of registration of a competing agrochemicals .

vision, Vision 2030, has as a target net sales of more than 200.0 billion yen, but there

CA1, our anti-pancreatitis drug for dogs, received conditional approval and went on

However, in our inorganic chemicals business, despite coal prices dropping from what

is a shared view by the president and every employee within the Group that we shouldsale in America at the end of fiscal 2022. We can expect sales to grow moving forward.

they were, titanium ore prices continue to rise, with the result being net zero in terms

emphasize profits.

On the other hand, however, our inorganic chemicals business struggled due to risingof profit and loss. Domestically, automakers are making a recovery as a result of easing

Coincidentally, the Tokyo Stock Exchange issued a request this spring to low PBR

raw material and fuel costs, particularly the cost of coal used for fuel. Despite taking

semiconductor supply and demand, thus helping ensure a stable shipping volume ofcompanies that they make improvements. PBR (price book-value ratio) is found by

top sales region for these products for the ISK Group. Sales within Europe, which has

I believe that the continued growth of the ISK Group will require greater earning capacity,13Message from the Director of Finance & Accounting Headquarters

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

multiplying ROE (return on equity) with PER (price earnings ratio), in other words, pastcaused a change in our fundamental assumptions. At present, we do not know exactly

profits multiplied by future value. Of these, I believe our first priority should be improving

how much will be needed to carry out a restructuring of the Yokkaichi Plant.

ROE, which is an indicator of management efficiency.

At the same time, however, we are deciding on new investments to be made in our

What is required to achieve this is structural reform which lowers the volatility of ourorganic chemicals business. In addition to several billion yen for the construction of an

Dividend Increase Aimed at a Consolidated
Payout Ratio of 30%

inorganic chemicals business, raises earning capacity and increases business value. Up

Organic Production Technology Research Institute (provisional name) in Ono City, Hyogo

In the fall of 2022, we changed our shareholder return policy. We aim to increase

until now, the discussion has been limited to how to switch to highly functional and high-Prefecture, we have established a barium titanate manufacturing joint venture together

the consolidated payout ratio to 30% by fiscal 2023, which is the final year ofvalue-added products, but we are now working from the ground up on measures thatwith Murata Manufacturing Co., Ltd. and our subsidiary, Fuji Titanium Industry.

Stage I. In line with this, we increased dividends by six yen for fiscal 2022, which

will realize a firmly future-focused strategy. We will summarize the results of discussion

To raise funding for these, our policy is to utilize “general syndicated loans,” which areultimately had increased revenue but decreased profits. We did this because, as

over the next six months into the next medium-term business plan, Vision 2030 Stage II

financing arrangements made by a syndicated group comprised of a wide range of

we aim for a consolidated payout ratio of 30%, we wanted to first get something(fiscal 2024 to 2026), and I believe that the next three years will serve as a touchstonefinancial institutions, including new financial institutions. As of September 2023, weclose to it. In addition, we will pursue flexible share buybacks along with solicitingof the extent to which structure reform can feasibly be carried out.

have already raised 13 billion yen under this framework. Fortuitously, in July, the long-

feedback from investors, which we will reflect within Stage II.

At just above 0.5x, our PBR is low, but whether we can get above the 1x level willterm issuer rating from the Japan Credit Rating Agency, Ltd. was raised to “BBB+”

Some companies are taking measures, even in the midst of their medium-term

depend on our structural reform.

(stable), creating an environment in which funding is easier to procure.

business plans, to get their PBR above 1x; in the case of the ISK Group, we are

The Tokyo Stock Exchange has further issued requests relating to “capital cost andIn addition, we will monitor operating cash flow in the latter half of fiscal 2023 as weplanning structural reform of our inorganic chemicals business. In other words, theshare value-minded management”. At ISK, as well, we perform an internal comparison

consider funding procurement for the year. In our organic chemicals business, as sales oflargest puzzle piece has not being fit yet, so we have to have everyone waiting.

of measured capital costs and ROE, and there are some question marks with regard to

agrochemicals based on a long-term account receivable turnover period have increased,

This in no way means that we are not focused on PBR. Even amongst the Board

fiscal 2022 performance and the forecast fiscal 2023 ROE. In general, the target given

the amount of working capital needed has also increased, thus requiring us to have a certainof Directors there is an awareness of share price trends, Tokyo Stock Exchange

for ROE is 8%, but we are still a bit short of that.

level of cash on hand. Also, although it will depend on how much titanium dioxide inventory

requests and other factors that has made “sub-1x PBR” a common phrase used

With regard to PER, we get into a discussion of future value, and this all depends onin our inorganic chemicals business can be cleared, it is difficult from the standpoint of

among the directors. Stage II is scheduled to be announced in May of next year, at

how high we can raise the future potential of our inorganic chemical business throughthose in charge of fundraising to make a prediction due to large, market condition-related

which time the results of discussions amongst the Board of Directors will be madestructural reform. Stage II will show everyone how we have answered the question ofgaps, such as the rapid accumulation of inventory after being depleted in fiscal 2022.

known.

Shareholder Returns

structural reform and will invite assessment.
Million yen

Shareholder Returns
Allocation and Funding

Active Investment in New Research Facilities
and Joint Ventures
In the Integrated Report 2022, I stated that we anticipate the amount of investment
will be 100 billion yen over five years, of which 65 billion yen is expected to be newinvestment. However, the situation has changed since then, and, given the negative
operating cash flow for fiscal 2022, we do not anticipate that the amount of future
investment will reach this level. This amount was originally calculated in anticipation ofa restructuring of the Yokkaichi Plant; however, business-related structural reforms have

Dividends paid

Dividends for FY2022

42

Purchase of treasury share
Consolidated payout ratio

1,999

yen per share

Increasing corporate value along with returning profits to shareholders are our top
management priorities.
Regarding dividends, our basic policy is to continue paying stable dividends in line withbusiness performance while comprehensively considering such factors as performancetrends, financial conditions and the sufficiency of internal reserves for future businessdevelopment.
We will utilize flexible share buybacks and provide shareholder returns with an awarenessof the total return ratio.
For Vision 2030 Stage I, the medium-term business plan, our aim is to achieve a consolidated
payout ratio of 30% by the final year of the plan (fiscal 2023).

23.9

12.3

2021

2022

1,907

2023

(FY)

Predicted

Achieved

36yen

%

1,601

1,438

Annual dividend(yen per share)

25.4

42yen

50yen
14

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Yokkaichi Plant

A Manufacturer’s Responsibility
To Make Exactly What the Market Needs
The Yokkaichi Plant is the flagship production base of our inorganic chemicals business. It has been thefoundation of ISK manufacturing for a great many years going all the way back to its establishment in
1941. What is the plant currently committed to, what is it working on? We put these questions to Yoshiyuki
Shimmyo, who, as Director of the Yokkaichi Plant, is the person responsible for its overall operation.

Yokkaichi Plant’s Commitment

Realizing Stable Supply and Stable Operation—In terms of manufacturing, what is it that the Yokkaichi Plant is committed to?
A stable supply. Our top priority is to stably provide users what they need, when they need it, and of the quality they need. To do this, it isimportant that you emphasize a smooth, speedy flow of operations, like a baton pass in track and field, from acquiring information about‘needs and seeds’ to product development and production. I believe that an outstanding plant is a plant that can do this.
Naturally, I am talking about plants that work to prevent workplace accidents, disasters and other occupational hazards. Without this, wecannot say we are providing a stable supply. With the exception of an annual maintenance shutdown, the Yokkaichi Plant operates aroundthe clock every day, including the New Year and summer Obon holidays. Plant shutdowns lead directly to increased costs. Our ability tokeep production going is where we shine.
Last year, when the COVID-19 pandemic was spreading at one of our workplaces, we faced the threat of a complete production
stoppage, but we were able to keep the production line running by reducing the production facility utilization rate by half and entrustingeach operator to contribute through his or her own roles and knowledge. I’m proud of this major accomplishment that, thanks to thecooperative efforts of everyone, we were able to ensure a stable supply even during the COVID-19 pandemic.
—What are the concerns facing manufacturing currently?
The titanium ore which the Yokkaichi Plant uses as the main raw ingredient in producing white pigment titanium dioxide is becoming harder to obtain due to decreasing titanium content at the ore extraction source, as well as due to overseas factors, such
Director of Yokkaichi Plant

Yoshiyuki Shimmyo

as conflict. The ore is not found in Japan and must be procured entirely from overseas. Furthermore, there is tight demand forthe ships that carry the ore, resulting in delays; there was a three-month delay between March and May of last year, forcing us
to make temporary production adjustments.
When this happens, we have no choice but to consider various ores that are more easily obtainable. These raw materials are15

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Yokkaichi Plant

difficult to use, tending to get stuck to, or clog up, our equipment. They also affect the white coloration which is so important to

Yokkaichi Plant’s Strengths

the product.

A Diversity Array of Quality Products and the Capacity to
Change Is Also Necessary—So how do you address this?
We do the best with what we have, even if it is a low titanium content ore. Leucoxene, for example. When performing the chloride—What are the Yokkaichi Plant’s strengths?

process of titanium dioxide manufacturing, a natural rutile with higher titanium content is the raw material typically used, andWe are able to supply a lineup of products tailored for different applications with a lead time significantly shorter than our com-

leucoxene is a natural rutile with a somewhat low titanium content which we have not used previously. However, by changing

petitors. Another strength is our ability to continuously provide products of consistent quality which meets the quality needs of our

the ore reaction temperature conditions, experimenting with additives or by making improvements to our equipment, such as

customers. We offer a wide variety of quality products. This is because we believe it is incumbent upon manufacturers to producechanging the shape of pipes to make it harder for material adhesion when handling powdered ore, we have mastered using theexactly what the market needs. Our ability to perform multi-product production is the cumulative result of the operators directly

material in order to ensure that we are able to continue providing a stable product supply. As we identify problems, we steadily

responsible for production demonstrating a commitment to ensuring that the baton passes from the first half of the production

make improvements while continuing manufacturing. This, I believe, is the most important aspect of plant management.

process to the latter half, and from one shift’s operator to the next shift’s operator without interruption over the course of a 24hour day, every day.
Our titanium dioxide business has been manufacturing primarily commodities for pigment application for many years, but, moving

Becoming a Plant Which Has Mastered the Use of Ore
I am in charge of the analysis operations connected with mastering theforward, we will expand into functional materials and other products in order to meet the changing needs of the market and ourcustomers. It is important to stay abreast of what the market is demanding in order to provide the exact products that the user islooking for; it is no good manufacturing the same old products in the same old way. It is essential that we, too, change.

use of new titanium ore. Titanium ore has different properties dependingon where it is mined, meaning properties such as reactivity and frangibility—What organizational structure have you adopted to capitalize on your strengths?

are not the same. Because some varieties can have yield and operations-

We have all the necessary departments, staff and equip-

related negative impacts, we use laboratory analysis to predict what

ment together in the Yokkaichi Plant, where everyone canphenomena will occur when they are actually used in production. However,collaborate and share knowledge together.

when it is difficult to make a determination based on lab results alone,

When producing a new product, we scale up gradually

we need to verify the impact on quality and operations through actualfrom laboratory to implementation level, but as the scaleuse in production. It is important to exchange detailed information withgets larger, variations in quality can often emerge. Figur-

operators, such as whether the reaction is progressing normally. I feeling out how to solve the problem in the actual production

rewarding sense of fulfillment whenever we are able to get throughequipment is not an easy task. So, at the Yokkaichi Plant,

production without any problems and I see how all the successive tests

the Development Division and Production Technologies

and experiments we conducted have paid off.

Division work together to create a prototype on the actual

R&D Strategy Headquarters
Production Technology R&D Division
Process Development Group Chief

Shogo Iseya

equipment, and, when issues manifest themselves, eachdivision works on them, changing different parametersand production equipment operating conditions in a process of trial and error until the new product is on track formass production.

GMP-compliant plant for pharmaceutical manufacturing

16

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Yokkaichi Plant

Looking Ahead for the Yokkaichi Plant

Using Equipment Replacement as an Opportunity toBring Widely Sought-after Products to Market—How do you incorporate environmental responsiveness?

ogy capabilities to the test to ensure we do not fall to second or third in line behind our competitors. It is important that we keep

We are in an industry which produces a lot of by-products, so we try to think up ways that they can be reduced. Looking ahead

updating our products with an eye towards, for example, the automobile manufacturers and packaging materials manufacturers

to 2030, which is the culminating year of Vision 2030, we are primarily focused on waste recovery and recycling. Specifically, we

who are end users of titanium dioxide, as well as in view of the increasingly rapid changes in the market.

are pursuing research and development into the collection and recycling of materials with recoverable value, such as titanium

I personally think this will mean we move in the direction of highly functional and high-value-added products which, I feel, meansoxide, that mix with by-products and waste and leave the production line, as well as the collection and product application of rare

the equipment and facilities updates we will make to the Yokkaichi Plant represent an opportunity for us.

metals, such as vanadium.

I also hope to increase employee engagement in their work. Just like we endeavor to keep our homes clean and to improve them,Also, with regard to greenhouse gases, there is no doubt that we need to reduce our use of coal as a boiler fuel. To address this,I want us to take the initiative to improve this plant, where we spend so much of our lives, making it a safe and rewarding place

the first measure we are taking is switching to LNG, and we have started introducing new boilers and taking other initial steps;

to work.

however, this is costly and will not serve as a real solution. In terms of CO2 emissions reduction, we are working towards a 30%
reduction by 2030 (compared with fiscal 2019), with the challenge of achieving carbon neutrality by 2050. It is important that
we pursue this goal in cooperation with the local community. Thus, since last year, we have participated in a study committeeof the Yokkaichi Chamber of Commerce and Industry, and from this year we have taken part in the discussions of the Yokkaichi
Petrochemical Complex Carbon Neutrality Promotion Committee. The governor of Mie Prefecture serves as chair, with the mayor
of Yokkaichi as vice-chair, while the other committee participants are comprised of the various companies within the industrial
complex. Although it is still in the initial examination phase, discussion is becoming increasingly active.
—What does the Yokkaichi Plant of the future look like?
In order to secure the foundation for our inorganic chemicals business amidst worsening profits caused by rising raw material andfuel prices, the Committee for Inorganic Business Restructuring comprised of representatives from sales, development, technology and back office departments, is examining our future direction and business model. Also, given that it has been 70 years since
the installation of our titanium dioxide sulfate processing equipment, and 50 years in the case of chloride process equipment, we
also need to address the issue of aging equipment and updating earthquake resistance.
What we need to be doing is anticipating how our products will be used in the world in the future so that we can be one stepahead in our manufacturing. While recognizing that there are many angles from which to consider this, such as sales strategy,
technology and finance, which means that this discussion cannot be limited to only the Yokkaichi Plant, we should seek to put inplace a system which produces products that appeal to a wider market, rather than simply what customers ask for.
To do this, we need the ability to anticipate the needs of society. This will put our marketing, development and production technol-

17Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Agrochemicals Business

Manufacturing Centered on Overseas Subcontractors
ISK will establish an Organic Production Technology Research Institute (provisional name; hereafter, “Ono Research Institute”) in Ono City, Hyogo
Prefecture. The aim is to achieve, via advancements in manufacturing technology, the world's lowest cost manufacturing and stable supply. We
spoke with three Biosciences Business Headquarters members who are part of the team working to establish the Ono Research Institute about theaims and future vision for it.

What is the Ono Research Institute?

A Production Technology Research Facility Equipped with Small-scale
Production Equipment
Ueda The focus of the Ono Research Institute will be on scaling up new products, such as agrochemicals developed at theCentral Research Institute (in Kusatsu, Shiga Prefecture), and on improving the manufacturing process for existing products inorder to reduce costs. In manufacturing, various conditions change depending on the scale of manufacturing, and this affects therelative ease and cost of production. A chemical reaction which is easy to achieve in a laboratory may not be able to be scaled
up as straightforwardly as you anticipated. Around 2006, we began outsourcing manufacturing overseas, and it was after we
had already completed some degree of investigation into how to scale up production that we brought the basic production data
to the subcontractors production site. Currently, because we do not have our own process verification facility, we are not able toperform simulations in Japan and have run into situations where problems at the subcontractors site forced manufacturing to behalted and where we were forced to borrow a subcontractors small-scale production facilities to perform tests on short notice.
Nakamura When scaling up the manufacturing process, we start at the scale of a normal laboratory, move to the “kilolaboratory scale,” which is tens of liters, then to “bench scale,” which is hundreds of liters, and then to “pilot scale,” which isthousands of liters, closer to full plant scale. These are the stages commonly used to verify the safety, consistency and costefficiency of the developed manufacturing process.
At the Ono Research Institute, we plan to construct two buildings. The first is the Technology Research Building, which will haveregular laboratory and kilo-laboratory scale equipment, and the second is the Synthesis Research Building, which will haveequipment for performing verification of the upscaling process.
One of the aims for the Ono Research Institute is to use its aggregated testing data to facilitate a smooth establishment of new

Biosciences Business Headquarters
Production Technology Division
Engineering Group Leader

Biosciences Business Headquarters
Deputy Supply Chain Division
General Manager

Biosciences Business Headquarters
Deputy Production Technology Division
General Manager

product manufacturing system at commercial production facilities. Also, for existing products, this facility will be used to help

Hiroaki Tomita

Takafumi Ueda

Tadashi Nakamura

with cost reduction through the development of new manufacturing processes and the acceleration of technology transfer tocontractors.

18

Special Feature

Commitment to Manufacturing

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Agrochemicals Business

Areas for ISK to Prioritize

we can perform cumulative verification testing to prevent these sorts of

Production Technology and Data Accumulation,
as Well as Human Resources Development

problems as well.

Tomita In the past, our approach has been to nail down initial production in-house and to hand over manufacturing to a contractor

on-site must, by necessity, be primarily handled by the subcontractor, thus

only after we have finished troubleshooting. Our adoption of contract manufacturing was not because that is what we preferred, but,

keeping us from accumulating sufficient information. When we want to, fordue to factors such as the strict restrictions of the industrial complex, we were unable to flexibly deal with issues, including testing andexample, outsource manufacturing among different subcontractor in order toresearch, at our own plant.

increase production, under the current system, the new subcontractor must

Tomita When we work with subcontractors, small problems which occur

start from square one accumulating data. The Ono Research Institute will
Nakamura After the ferosilt scandal, there was a period where we were unable to secure sufficient new capital investment for ourconsolidate these technical specifications, thereby speeding up production

plant and, ultimately, gave up on in-house manufacturing in favor of outsourcing. Looking back on the circumstances and situation at thestartup, as well as facilitating improved product quality and productivity.

Planned site of the Ono Research Institutetime, I feel that we had no choice but to adopt such a system.
Tomita The biggest problem with this situation is that young employees do not gain experience with actual manufacturing. Those

Future Prospects

like me in our forties are the last generation to have experience with manufacturing at actual production scale. Employees who joined

Envisioning a Flagship Production Base and Information Hub

the company after my generation were focused primarily on process development in the laboratory and did not gain experience in theuse of large-scale equipment. This makes it impossible to build up production technology in-house under conditions close to those of

Ueda For the time being, our main research focus will be the active ingredients in agrochemicals; however, we hope to grow thiscommercial production.

research facility over the next several years to the point where it can handle formulation manufacturing and animal health products’
active pharmaceutical ingredients, as well as organic intermediate products and all of ISK’s organic chemical products. For animal health

Ueda Once the Ono Research Institute is established, young employees will be able to experience manufacturing on a large scale.

products manufacturing includes small-scale manufacturing ranging from tens of liters to hundreds of liters; thus, we are also envisioning

Human resources development is a major aim of the Ono Research Institute. It is scheduled to launch with around 30 employees, but

the possibility of developing the research institute into a GMP-compliant manufacturing base which is capable of manufacturing active

we hope to expand the facility over time, increasing the number of employees to around 100. We will also promote human resources

pharmaceutical ingredients.

exchange with the Central Research Institute and the Yokkaichi Plant, and I expect that the human resources we develop will go
on to work in sales, procurement and other departments throughout ISK.

Nakamura In terms of transferring manufacturing technology overseas, it would also increase the efficiency of technology transfer
if, instead of our employees going to the contractor’s site, their employees came here and worked together with us on the scaling-up

Nakamura Safety is another priority. When you apply the sameprocess at the Ono Research Institute. I would like for us to put a system in place to facilitate that. In addition to cross-border exchange,

approach to the commercial scale as the laboratory level without

I would also like the research institute to take on the role of technology information hub, disseminating and relaying information to ourconsidering well, unforeseen problems can arise. This is something

production sites around the world.

which happened a long time ago, but a chemical reaction during theOn-site guidance at the manufacturing contractor

manufacturing process of a certain fungicide caused an uncontrollable

Tomita Ten to twenty years from now, securing human resources will likely be more of a challenge. In anticipation of that, I would like

temperature increase on the bench scale, whereas it washad been a

us to pursue tie-ups with other research institutes, such as universities. My dream is that we would collaborate on everything from basic

mild temperature increase on the laboratory scale. We were somehow

research to market launch, which would also lead to being better able to secure human resources. I want us to become the hub Mr.

able to get it under control, but, if it had happened in a larger facility, it

Nakamura describes and to develop it into a hub which builds organic connections not only with universities but other companies in thewould have resulted in a major accident. At the Ono Research Institute,same industry as us.

19Value Creation Process

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Creating value through our purpose to achieve Vision 2030
The ISK Group will be continuing to expand its business by taking its corporate purpose as a starting point and leveraging its core competence of chemical technologies; its threeprincipal strengths, in the form of its ability to develop proprietary technologies, accommodate quality and environmental requirements, and collaborate globally; and its management
capability, which underpin those strengths. In this way, we’re striving to achieve Vision 2030, which seeks to balance economic value with sustainability value.

PurposeTo continue contributing tobetter living environments
through chemical technologies

Value Creation Core

Vision 2030 Goal

Providing a comfortable living environment

Originality. Acceleration. Global Reach.
Transforming Lives Throughthe Power of Chemistry.

p14

Research and development

Ability to collaborate
globally

OutcomeAbility to develop proprietary
technologies

Providing innovative lifestyle products

Chemical technologies

Basic Philosophy
p02
Sales and supply

Input
p21

Providing environmentally friendly products• Ultra-fine particle manufacturing• Surface treatment• Organic synthesis• Formulation manufacturing
technologies

Ensuring a stable supply of agricultural products
Procurement andproduction

Improving quality of life (QOL)

Ability to accommodate quality andenvironmental requirements

Management capability

Corporate GovernanceAn era characterized by VUCA (volatility, uncertainty, complexity, ambiguity)in which the future is unpredictable

Megatrends• Net sales of greater than 200 billion yen• Operating margin of 15% or more
• ROE 10% or more
• Continued stable return for shareholders
Contributing to realization ofa sustainable society together withimproving our corporate value
through such business activities.

Outputp21

Management foundation

Climate change

Urbanization Resource shortages and food problems Growth and aging of the global population Rapid development of IT

20

Input and Output

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Promote Value Creation through Continuous Input
ISK Group’s definitions of the inputs and outputs of the six capitals of value creation are given below. We will realize Vision 2030 through ongoing enhancement of inputs.

Financial Capital

Input• Total assets (FY2022 consolidated)• Interest-bearing debt (end of FY2022)• Shareholders’ equity (FY2022 consolidated)

Role in Value Creation

Output201.9 billion yen Total assets from which revenue is generated, as well as interest-bearing debt and shareholders’ equity, which • Forecast performance for FY2023
as the primary means of raising capital in establishing these assets, are set as our main financial inputs.
• Consolidated net sales
56.0 billion yen serve
To realize Vision 2030, our long-term vision, we will efficiently utilize total assets in order to secure market• Consolidated operating income
95.4 billion yen share and thereby increase consolidated net sales. Also, adjusting a balance between interest-bearing debt
and shareholders’ equity will facilitate improved ROE along with greater capacity for future investment.

• ROE

147 billion yen
11 billion yen
7.5 %Manufacturing Capital• Capital investment (FY2022 consolidated)• Titanium dioxide production capacity(No. 1 in Japan)

5.9 billion yen The key manufacturing inputs are production capacity, which underpins our top share of the domestic titanium • Change in the titanium dioxide production
dioxide market, and capital investment sufficient to increase production of highly functional, high-value-added facility utilization rate
168,000 tons
products. We achieve efficient facility operation sufficient to meet demand through the application of our (FY2021 consolidated -> FY2022 consolidated)unique expertise coupled with timely replacement investment in production equipment and facilities. We will • Highly functional, high-value-added products as atake advantage of a new production line for highly functional products to increase the share of inorganic percentage of inorganic chemicals business sales
chemicals business sales accounted for by highly functional, high-value-added products.
(FY2022 consolidated)•Expertise cultivated over many years,
essential to high-quality and stable manufacturing

5.5 % decrease
32 %Human Capitalper
24 hours
person/year

1,768 people• New graduate hires (FY2022 non-consolidated) 23 men, 4 women• Mid-career hires (FY2022 non-consolidated) 44 men, 5 women

Securing and making the most of a diverse group of human resources is one of the key priorities of the
ISK Group. We strive to secure human resources with a challenging spirit and a global mindset, regardless of their gender or nationality, as newly hired graduates or mid-career hires.
We also help newly hired employees develop their careers in order to strengthen their basic skills asworking members of society, raise the awareness of employees at all levels of their roles, and prepare
promising candidates for executive roles. This new system provides all employees with the opportunity totake on high-level job challenges and to get various kinds of training. Through these procedures, wedraw out greater value from our human resources.

Transparency in business activities abiding bylaws and regulations• Number of countries where we sell
our products

In keeping with the Group’s corporate philosophy, we strive for the sustained growth of our business and • Coexistence with local communities
growth in our corporate value through a commitment to compliance and management that is transpar- • Sustainable procurement: Establishment of ISK Group Policy on Procurement
ent, trustworthy, and sound. We promote two-way communication to earn the trust of local residents, for and guidelines governing procurement, pursuit of human rights due diligenceexample through efforts to ensure safety and disaster prevention, environmental activities, and active
TM
communication of information. In addition to undertaking human rights initiatives, we observe the laws • External honors: ISK’s HASClay was awarded in the outstanding
and regulations in every country and region in which we operate, and we ensure our purchasing activi- energy-saving/low-carbon machinery and systems category in 2022
commendations by the Japan Machinery Federation.
ties are characterized by decency and adherence to social ethics.
Our Blue Gene™ won a 2022 Flower of the Year prize in the Japan Flower
Selections competition organized by the Japan Flower Selections Association.

• Employees (FY2022 consolidated)• Training time per person (FY2022 non-consolidated)• Employees who took childcare leave(FY2022 non-consolidated)• Female manager ratio (FY2022 non-consolidated)• Paid leave acquisition rate
(FY2022 non-consolidated)

13 people
7.6 %81.9 %

Social and Relationship Capital

78 countries

21

Input and Output

About ISK

Natural Capital

Input
Yokkaichi Plant FY2022• Energy (heavy fuel oil equivalent)• Industrial water• Seawater• Titanium ore

Value Creation Strategies

Foundation for Value Creation

Corporate Data

OutputWe treat energy, water, and titanium ore consumption at Yokkaichi Plant and our subsidiary, Fuji Titanium
as key indicators so that we work to reduce the volume of our CO2 emissions, water usage, and140,000 kiloliters Industry,
industrial waste disposal. By reducing coal-fired boiler CO2 emissions as part of our efforts to address
16 million m³ global warming, we aim to preserve a comfortable living environment. Through more thorough chemical
10 million m³ substances management, we are reducing the amount, and amount transferred of, our emissions, withthe goal of reducing the impact on humans and the ecosystem to as close to zero as possible.
150,000 tons

Yokkaichi Plant FY2022• CO2 emissions
400,000 tons
• Wastewater emissions into public water areas
26 million m³• Industrial waste
95,000 tons
PRTR-listed substances
1,500 tons

Intellectual Capital
R&D expenses (FY2022 consolidated)(Inorganic chemicals(Organic chemicals• Percentage of R&D employees(FY2022 non-consolidated)

9.1 billion yen Research and development have long been a priority for ISK Group. We ensure that a certain threshold • Number of patents held
R&D expenses is met regardless of fluctuations in business performance. R&D activities at the(end of FY2022 non-consolidated)
1.5 billion yen) for
Central Research Institute and Yokkaichi Plant account for the majority of R&D expenses, while some are(Japan)
7.6 billion yen) used for the registration of agrochemicals in various countries. Drive the development and patenting,
22.2 %(Overseas)
both in Japan and overseas, of new agrochemicals and drugs, highly functional titanium dioxide materials and more, as well as facilitate the creation of new business associated with them.
• Products developed in-house as a percentage
of organic chemicals business sales(FY2022 consolidated)

2,502
242
2,260
88.6 %

To p i c s
Global Intellectual Property Offensive
The illustration on the right shows the number of patents ISK holds, by region.

Europe1,089 (43%)

We hold patents throughout the world, including in Japan, the U.S., Europe, South America, and Africa.

Asia

In order to support ISK’s global business through intellectual property, Intellectual Property division

507 (20%)collaborate our business divisions to acquire patents for products in the regions where we plan toJapan
242 (10%)

North America
216 (9%)market them.
Patent acquisition efforts are conducted based on the laws of the target countries and theembodiment and timing of the patent. In the field of agrochemicals, for example, in addition
to substance patents for active ingredients, we are studying moving on to patent applications
related to manufacture process, formulation, and mixed formulations, as well as patent extension
registration and trademark registration application. Such efforts will expand our portfolio andMiddle East and Africa
169 (7%)
Oceania
83 (3%)South America
196 (8%)maintain our business advantage.

22

Financial and Non-Financial Highlights

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Financial Highlights (Consolidated)
Net Sales

Operating Income

Million yen

131,238

106,441

Operating margin

Million yen%

ROEMillion yen%

R&D Expenses

Ratio of R&D Expenses to net sales

Million yen%

11,69011,557

11,372110,955

Net Income Attributable to Owners of Parent

101,066 101,774

8,631
10.7

12.2

9.1
7.6

7.3

6.6

5,173
6.1

8,070

13.6 6,947

10.4

6,188

9,150

8,683

8,639

9,156
8,165

8.5
7.4

7.0

2021

2022

3,373

5.1
2,359

4.3

3.1

2018

2019

2020

Capital Investment

2021

2022

(FY)

Depreciation expense

Million yen

Million yen

2018

2019

2021

Interest-Bearing Debt

2022

2018

(FY)

D/E ratio

Million yen

%

2019

2020

2021

Dividends per Share

2022

(FY)

Payout ratio
%

Yen

2018

2019

Total Dividends Amount2020

56,081

60,103

7,141
6,092
4,445

5,330
5,225

4,669
4,545
4,542

49,52852,531Million yen

2,710

0.8
0.7

0.7

0.6

36

33.9

50,420

0.6

20

(FY)

Purchase of treasury share

Million yen

42

8,062

4,266

2020

23.9

21.3
18

12

1,438

12.3

722 799 727 719 730

1,601
734

479
5.5

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

23

Financial and Non-Financial Highlights

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Non-Financial Highlights
Environmental

OthersGreenhouse Gas (GHG) Emissions (ISK Group*1)
GHG emissions

GHG emissions year-on-year

Thousand tons CO2

101.3

499

87.0

490

Energy Intensity (Japan, consolidated*2)

Number of Patents Held (non-consolidated)

t

kl/t

Cases

%

119.7
98.2

Industrial Waste (Sludge) (Japan, consolidated*2)

97.5
511 498

80,97080,79874,96277,559

0.82

0.84

2018

2019

0.90

0.85

2,864

0.89

2,714

2,600

2,527

2,502

2020

2021

2022

62,625

427

2018

2019

2020

2021

2022

(FY)

2018

2019

2020

2021

2022

(FY)

2020

2021

2022

2018

(FY)

2019

(FY)

SocialNumber of Employees

Workplace Accidents (Japan, consolidated*2)
Frequency rate of lost-worktime injuries
%

%

1.01

(non-consolidated)

Persons

%

1,070
1.07

Female employee ratio(non-consolidated)

Severity rate

1,106

1,149

1,144

16.9

16.9

17.1

2018

2019

0.07

2020

0.01

2021

Paid Leave Acquisition Rate
%

%

18

75.6

77.0

2018

2019

73.6

77.0

81.9

15
13

12

16.9

0.50

0.02

(non-consolidated)

Persons

14

16.4

Female manager ratio(non-consolidated)

1,146

0.93

0.56

0.01

Number of Female Managers

7.6

6.0

6.4

5.4

5.1

2018

2019

2020

2021

0.03
2022

(FY)

*1 Entire ISK Group*2 Operated by ISK and Fuji Titanium Industry Co., Ltd. Production facilities only.

2018

2019

2020

2021

2022

(FY)

2022

(FY)

2020

2021

2022

(FY)

24

Materiality

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Materiality for the ISK GroupThe Group has identified materiality (key issues) with the potential to impact its medium- and long-term corporate value. We’ve established medium- and long-term key performanceindicators (KPIs) for eight key issues with an extremely high level of importance for both stakeholders and the ISK Group, which we’ve determined comprise the most important issues,
and will undertake specific initiatives to address them. By addressing these issues, we strive for the sustained development of society and the creation of sustainable corporate value.

Identified Materiality

Materiality

Dealing with climate change,
reducing environmental impacts• In carrying out business activities, we implement load reduction initiatives in the following
environmental domains, including climate change, energy use, and pollutant emissions reduction• Set mitigation targets and take action in response to climate change• Preserve biodiversity• Recycle and reuse water• Reduce energy usage• Reduce greenhouse gas emissions and other initiatives for atmospheric emissions• Reduce industrial waste and pollutants emissions• Procure environmentally friendly resources, improve resource efficiency• Pollution prevention and chemical management

Technological development capabilities• Work to further improve ISK Group’s technological development capabilities, which represent oneof the Group’s strengths, through advancement of core technologies and the pursuit ofinnovation

Supply chain management• Address the environmental, social, and human rights-related issues in the supply chain andimplement fair and impartial procurement• Preserve the quality, cost, and supply stability in order to meet the market need

Occupational health and safety,
operation safety and disaster prevention• Ensure the health and safety of labors at workplace, and make sure operation safety and disasterprevention

Diversity and inclusion• Create workplaces that value the individual, foster mutual respect, and empower all employees,
regardless of gender, age, disability, nationality, lifestyle, work backgrounds, values, or otherattributes• Accommodate individual differences in experience, ability, and thinking, and facilitate skills
development and improvement to help all employees achieve maximum performance

BCP, risk management• Ensure the thoroughness of risk management and BCP (Business Continuity Plan) in order tominimize the impact from external risks

Issue Importance Evaluation

Very
high

Stable supply of crops
Contribution to deepening IPM
for biorational products
Contribution to healthcare
Contribution to a smart society

Dealing with climate change, reducing environmental impacts
Technological development capabilities
Supply chain management
Occupational health and safety, operation safety and disaster prevention
Diversity and inclusion
BCP, risk management
Corporate governance
Reforming workstyles by pursuing digital transformation (DX)and streamlining operations

Level ofimportance tostakeholders

Information security

Addressing
the 8 most important
issues of
the 16 identified topics

Quality

Coexistence withlocal communities

Stakeholder engagement

Very
high

High
Level of importance to ISKProcess for Identifying Materiality and Establishing KPIs
STEP 1

STEP 2

STEP 3

STEP 4

Issue identification

Prioritization

Materiality identification

Establishment of KPIs

• In accordance with GRI, SASB,
and other guidelines,
as well as the ISK Group’s
long-term vision and other resources,
we identified issues that deserve tobe emphasized.

• We carefully reviewed
the importance of issues
for ISK based on their alignment withour corporate purpose and other policies,
and the importance of issues for stakeholders
based on industry issues, key ESG themes,
and other resources.

Outline• Outside experts reviewed
the process and verified its suitability.

• We reviewed materiality-related
indicators highlighted by
ESG evaluation organizations.

Corporate governance• Finalized following deliberation by
the Executive Management Committee
and approval by the Board of Directors.

• We then established KPIs after
conducting interviews with businessdepartments and other entities
as necessary.

• Strengthen governance to improve organizational operation and performance• Ensure compliance and corporate ethics, foster operational transparency

Reforming workstyles by pursuing digitaltransformation (DX) and streamlining operations• Pursue DX to streamline operations and implement work style reform

25

Materiality

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Eight Most Important Issues and KPIs
Materiality

Dealing with climate change,
reducing environmental
impacts

OutlineKPI

FY2022
Target/FY

Achievements

FY2023

Scope

Target updated/FY

Set mitigation targets and take action in response to climate change

CO2 emission reduction rate (Scope 1+2, vs. FY2019)30% or more/2030

1.7% increase(FY2019 levels)

30% or more/2030

ISK Group

Reduce energy usage

Reduction in energy intensity

1% or more/Every year

0.3% decrease(Year-on-year)

1% or more/Every year

Japan, consolidated

Reduce industrial waste and pollutants emissions

Industrial waste emission reduction rate (vs. FY2019)50% or more/2030

22.1% reduction(FY2019 levels)

50% or more/2030

ISK

Pollution prevention and chemical management

Adherence to voluntary control standard values that are stricter thanenvironmental laws (wastewater, waste gas)

Continue/2030

Achieved

Continuing/2023

Japan, consolidated

Technological development
capabilities

Work to further improve ISK Group’s technological development capabilities, which represent one of the Group’s strengths, through advance- Creation of new products and technologies in each business segment
ment of core technologies and the pursuit of innovation

Establish on a perdepartment basis/2023

Working according to the Establish on perplans
department basis/2023

Japan, consolidated

Supply chain management

Address the environmental, social, and human rights-related issues in Establishment of ISK Group Policy on Procurement and guidelines
the supply chain and implement fair and impartial procurement
governing procurement

Announcement/2023

ISK Group Policy on Procurement
has announced and guidelines Establish guidelines/2023
under review.

ISK Group

0 accidents/2023

Frequency rate: 0.56
Severity rate: 0.03

0 accidents/2023

ISK,
Fuji Titanium Industry

100%/2022
Continue/2030

100%100%, continuing/2030

ISK

75% or more/2022
80% or more/2030

81.9%

80% or more/2030

ISK

Create workplaces that value the individual, foster mutual respect, Female manager ratio
10% or more/2030
and empower all employees, regardless of gender, age, disability,
Mid-career hires as percentage of managers (average for last three years) 30% or more/2022
nationality, lifestyle, work backgrounds, values, or other attributes

7.6%

10% or more/2030

ISK

29.3%

30% or more/2023

ISK

Accommodate individual differences in experience, ability, and think- Time spent in training and/or classes per employee
ing, and facilitate skills development and improvement to help all
Cost of training sessions and/or classes per employee
employees achieve maximum performance

24 hours

20 hours or more/2023

ISK

Frequency rate of worktime injuries, severity rate*

Occupational health and safety,
Ensure the health and safety of labors at workplace, and make sure
Percentage of employees undergoing health checkups and stress checks
operation safety and disaster
operation safety and disaster prevention
prevention
Paid leave acquisition rate

Diversity and inclusion

20 hours or more/2022

50,000 yen or more/2022 50,000 yen

50,000 yen or more/2023 ISK

BCP,risk management

Ensure the thoroughness of risk management and BCP (Business
Implemented through Corporate Risk Management Committee initiatives
Continuity Plan) in order to minimize the impact from external risks

Achieve plan/2023

Progressing according to
the plans

Achieve plan/2023

ISK Group

Corporate governance

Ensure compliance and corporate ethics, foster operational transparency

Participation in at least 1 compliance training session

100%, continuing/2022

100%

100%, continuing/2023

Japan, consolidated

Effective contribution to operational streamlining

3 or more/2022

3

3 or more/2023

ISK

DX certification

Acquire/2023

Progressing according to
the plans

Acquire/2023

ISK

Reforming workstyles by pursuing digital transformation (DX) Pursue DX to streamline operations and implement work style reformand streamlining operations

Frequency rate of worktime injuries: Number of employees injured or killed in occupational accidents per 1 million total working hours; indicates the frequency of occupational accidents.
Severity rate: Number of working days lost per 1 thousand total working hours; indicates the severity of occupational accidents.

26

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Revenue Trends for Inorganic Chemicals BusinessInorganic Chemicals BusinessNet sales

Operating income

Billion yen

77.5

Titanium dioxide is the flagship product of our inorganic chemicals business. In addition to white pigmentused in paints, industrial products and other applications, we are global suppliers of an electronic

64.4

59.8

Billion yen

63.5

component material for ceramic electronic devices, an electronic component material for ceramicelectronic devices, and high-value-added titanium dioxide used as, among other things, such as in

5.3

4.5

automobiles, and as a pollution prevention catalyst.

1.8

-0.6

Social Issues and Environment

2021• We are tackling the challenge of developing materials intended for devices that will support the next-generation infrastructure

2022

Actual2023

2023

Medium-term

Forecast(FY)

Director of Inorganic Chemicals Sales &Marketing Headquarters

Masaki Shimojo

essential to a smart society adapted to an aging population, declining workforce and changing lifestyles.
• We continue contributing to better living environments by providing materials and solutions that lead to self-driving technology
and remote control technology.
• We are strengthening to develop our environmentally friendly product and to develop manufacturing processes that reduce
environmental impacts. (energy conservation, heat recovery/reuse, waste reduction, recycling)

Risks and Opportunities
Risks• Reduced earnings due to rising costs for energy andraw materials, such as titanium ores

Contributing to Devices Supporting Next-generation Infrastructure
EV (electric vehicles)

Smart glass

Copper particles(sintering material for use in power semiconductors bonding)

Organic solvent dispersion of TiO2
(highly refractive material)

Camera module

High-speed communication equipment

Opportunities
While continuing to monitor market trends, pass costs on to product prices
and increase the sales percentage for high-value-added products.
Also, including technological improvement,
diversify raw materials used to expand the range of options• Accidents and other problems due to aging production
facilities and equipment

Carry out preventative maintenance and study the appropriate
timing for replacing equipment and facilities• Drop in market price and ISK market share as a result of growthamong Chinese titanium dioxide manufacturers

Work towards increased and stable revenue by continuing to provide the market
with high-value-added products based on ISK’s unique technology

Strengths and Competitive Differentiation from Competitors• Our technological strength cultivated over many years, along with our meticulous customer service, allow us to stably bringhigh-quality products to market that meet customer needs.
• Our titanium dioxide business has held the top market share in Japan for many years. We are the only company in Japan with
manufacturing facilities for both sulfate and chloride processing, allowing us to provide a diverse range of products.

AiP
Battery• Super-weatherable titanium dioxide, black heat-shielding pigment, acicular white electro-conductive materials… We’ve been
venturing into a diverse range of applications with these unique product lineups that no other company offers.

AiP

LUSHADETM BLACK(super black light absorption material)

Acicular type titanium dioxide(high dielectric/low dielectric loss tangent material)

27

Overview by Business

About ISK

Strategies
In our inorganic chemicals business, one of the business strategies and initiatives we are pursuing is “increasing the sales ratio

products may have declined, their sales are steadily increasing, even with a softening global market.
In preparation for Vision 2030 Stage II, we are steadily pursuing development and marketing for new highly functional and high-Foundation for Value Creation

SDGs Goal 9

Build resilient infrastructure, promote inclusive and sustainable industrializationand foster innovation

Provide highly functional and high-value-added products which contribute to devices that support next-generation infrastructure

value-added products. Our target market is devices which support next-generation infrastructure through self-driving technology

The copper particles and organic solvent dispersion of TiO2 currently in development are new materials for use in EV (electricand remote control technology, and we are planning to introduce a succession of products to that market, including a highlyvehicle) power semiconductor bonding, AR (augmented reality) device sensors and other applications. Through these, we will

refractive material for smart glass, LUSHADE

offer new possibilities in the areas of the environment, labor efficiency, education, communication and advanced information

BLACK (super black light absorption material) for camera modules and copperTM

particles for use in power semiconductor bonding. During the Stage II period, our aim is to achieve sales of several billion yen forthese new materials collectively.

Corporate Data

Environmentally and Socially Beneficial Materials

for highly functional, high-value-added products.” However, in Stage I, we did not reach our target sales ratios for each fiscal year.
This was due to an increase in sales of general products, and, while the sales ratio for highly functional and high-value-added

Value Creation Strategies

communications.
Bonding Material for Use in Power Semiconductors(copper particles)

Highly Refractive Material(organic solvent dispersion of TiO2)

Sales Ratio for Highly Functional, High-value-Added Products
Net sales

Ratio for highly functional, high-value-added products

Billion yen%

33

Achievements andforecast

Medium-term

37

40.4

16.3

19.4

2020

2021

ActualApplied to glass
Use: AR device sensors, optical filter/anti-reflection coating

34
32

33.4

Powder
Paste
Use: High heat-resistant bonding for power semiconductors used in EVs

40

Actual32

30
General products

43.5

20.8

2022
ActualSDGs Goal 13

Take urgent action to combat climate change and its impacts

Supply new heat storage materials which contribute to energy conservation and CO2 reduction

54.3

Our HASClayTM high-performance heat storage material can
23.1

2023

Forecast

Highly functional,
high-value-added products

more than twice the heat storage capacity of conventional
materials. Additionally, there is no need for heat insulation(FY)[Overview of Adsorption Thermal Storage System]

store low-temperature waste heat of around 100°C and has

when storing heat for a long period of time. Because the heatstorage tank can be transported so that the waste heat canbe used in another location, it is expected that this material
will be used as a “heat battery” which contributes to effectiveenergy utilization and CO2 reduction.
High-performance heat storage material(HASClayTM)
Use: Effective utilization of waste heat fromplants for heating, pool heating, etc.

Air + moisture
Adsorption thermal
storage tank

OUT

Heat storage material

High-temperature
low-humidity air
OUT(Heat)Heat storage material

Desorption (adsorption material)

Adsorption (adsorption material)

IN

IN

High-temperature air

Heat(waste heat)

Air + moisture[Charging][Discharging]

Humid air28

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Revenue Trends for Organic Chemicals Business

Organic Chemicals Business (Agrochemicals)

Net sales

Operating income

Billion yen

fungicides, and insecticides. As the industry pioneer that first introduced chemical pesticide technology,

Billion yen

58.7
11.2

48.2

we’re currently one of the leading exporters by value in Japan. We’ve made solid progress in gaining a

9.0

foothold in the European and U.S. markets.

6.6

Social Issues and Environment

2021• There is a need for agrochemicals in order to produce food for the world’s ever-growing population.

66.7

63.7

In our agrochemicals business, we manufacture and distribute agrochemicals such as herbicides,

9.0

2023

2023

Medium-term

Forecast

2022

ActualDirector of Biosciences Business
Headquarters(FY)

Mikiya Horie• We provide safe agrochemicals which satisfy the increasing physical and mental health-consciousness that is being seen worldwide.
• We incorporate environmental considerations for the sake of protecting biodiversity.
• We provide agrochemicals adapted to the climate change-induced changes in the crop production environment.

Global Agrochemical Market(Agbio Crop 2022)

Billion US $14.3

Sales of agrochemicals have steadily increased overthe past five years due to such factors as expanding
acreage for crops like soybean, with particularly notable
increases in Brazil, India and China.

Risks and Opportunities
Risks

Opportunities• Delay in, or failure to achieve,
product approval orregistration

Take proper approach to countries’ registration agencies and authorities; assess other companies’
agrochemicals registration and survey their registration status; secure personnel with expertisein highly specialized fields, ensure handover of registration know-how• Revised and stricter laws
and regulations

Appropriately gather information relating to laws and regulations and registration requirements• New entries andintensifying competition

Lower production costs to strengthen competitiveness; develop new molecule andmixed formulations that will enable ISK to stand out in the agrochemicals market• Crop injury
by agrochemical products

Strengthen safety confirmation by performing growing tests in fields; promote anddisseminate appropriate methods for using agrochemical products

Strengths and Competitive Differentiation from Competitors• Expand market share and improve profitability by launching new formulations and mixed formulations of existing products andby lowering production costs• Ensure a stable supply and cost reduction by having flexibility in procuring active ingredients through integrated manufacturingthat encompasses key raw materials or intermediates and active ingredients, purchasing of active ingredients from othercompanies, and joint procurement with other companies• Leverage ISK manufacturing technology to actively sell organic intermediate products• Shorten the registration schedule (initial registration, label expansion, change of manufacturing site, etc.)• Add other species of blue flowering plants (blue dahlia, large-flowered blue phalaenopsis)

29

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

Strategies
Reducing the Manufacturing Cost of Next-Generation Flagship Agrochemicals and Increasing Demand

Agrochemical Products Developed with Food Problems and Biodiversity in Mind
SDGs Goal 2

Tiafenacil is an herbicide jointly developed by ISK and FarmHannong Co., Ltd. (Korea) which is being sold worldwide. Thus far
it has been released to market in South Korea, the U.S, Canada, Brazil and various other countries and has been well received
by farmers. Since it quickly decomposes and becomes ineffective in the soil, it is used for weeding before crops are planted.
This sort of usage is called “burndown.” Compared to previous burndown herbicides, this product stands out for its herbicidal
effect on a wide range of weed species. The size of the burndown herbicide market in the U.S. is approximately 200 billion yen,with inexpensive herbicides being used. Given that this product is inexpensive to manufacture, it was able to be introduced into
the U.S.’ large market for cheap herbicides as a functional and cost-competitive option. This is an example of how reducing
manufacturing costs led to increased demand. In addition to burndown, this product is also used as a withering agent.
Harvesting takes longer if there are leaves left on plants like potatoes and grains. Therefore, certain types of herbicides are used
to kill the above-ground parts of the crop to make harvesting more efficient. Such herbicides are known as “withering agents.”
Another notable feature of this product is that it exhibits a fast-acting herbicidal effect. This fast-acting effect makes it suited
for use as a withering agent. We are aiming to further expand sales of this product by widely marketing as a withering agent inaddition to being a burndown herbicide.

End hunger, achieve food security and improved nutrition and promote sustainable agriculture

Agrochemicals contribute to the stability of food production, which helps in achieving a society without hunger.
Agrochemicals contribute to the stability of food production, which helps inachieving a society without hunger. Farms with large cultivated areas and thesame crops cultivated over long periods of time are more likely to suffer major
damage from pests and diseases. By using agrochemicals, it is possible to control
pest and disease damage, thereby helping to ensure harvest yield and quality
which, in turn, helps ensure the people of the world are supplied with essential
food at a reasonable price.
In order to put an agrochemical on the market, it must be registered in accordance with the laws and regulations of eachcountry. If it cannot be shown, using various data, that it is safe for humans and the environment, that agrochemical will not beregistered. Thus, all of the agrochemicals we sell meet the safety standards of each country.

Agrochemical Sales Plan by Product• Americas steady expansion of upcoming flagship agrochemical products• Continued, strong performance of flagship fungicides
643

619
151
472

552

151

Others98

Next-generation
flagship products

76
68

101

Providing agrochemical products that are developed with biodiversity in mind.

81

Flonicamid

example, we sell the agrochemical fluazinam, which is a highly
Principal Next-Generation Flagship Products

active fungicide used to control various diseases in a wide

14

range of crops. It is not easily taken in by the plant body, has

41
119

72

88

127

25

Cyazofamid

37
87

85
174
99

109

22
161

Fluazinam

4
11

23

29

33

25

2021

2022

2023

2023

Nicosulfuron
(FY)

11

20
16

27

Medium-term

Forecast

Tiafenacil

21

Cyclaniliprole

30

Tolpyralate

2021 2022 2023 2023
Medium-term Predicted

ActualProtect, restore and promote sustainable use of terrestrial ecosystems, sustainably
manage forests, combat desertification, and halt and reverse land degradation andhalt biodiversity loss

The ISK Group sells a variety of agrochemical products. For

147

137

SDGs Goal 15

excellent residual effectiveness and rain resistance, and has astrong preventive effect.
Fluazinam has been confirmed to be highly safe for the natural
enemies of pests and for beneficial organisms. It is used with a variety of crops in a wide range of areas, including to control
soybean Sclerotinia stem rot in Brazil, diseases in turfs in the U.S., and potato late blight and wheat snow mold in Japan. This
agent is difficult for fungi to develop resistance to and is effective against fungi which have developed resistance to other(FY)

fungicides.

30

Overview by Business

About ISK

Value Creation Strategies

Foundation for Value Creation

Corporate Data

• Revenue Trends for Organic Chemicals Business(Healthcare)Organic Chemicals Business (Healthcare)
The vision for our healthcare business is to sustainably contribute to people’s quality of life through our fine chemical tech-

Net sales
1,784Million yen

nologies and marketing capabilities, and, by capitalizing on the technological strengths which we have cultivated in ourorganic chemicals business to manufacture and sell animal health products and to perform contract manufacturing of active
pharmaceutical ingredients, we are protecting the health of people and animals and contributing to the realization of a fulfill-

1,089

ing life both physically and mentally. We bring to market products that address unmet latent needs in human and veterinary
medicine, and, moving forward, will promote global expansion not only in Japan but also mainly in Europe and the U.S.

Social Issues and Environment

Director of Healthcare Business
Headquarters

2021

2022

(FY)

Hiroyuki Watanabe

As the global pet-related market expands, medical need for companion animals (CA) is also
expanding. However, the supply of therapeutic agents is not sufficient to meet this need.

Markets

SDGs Goal 3

Ensure healthy lives and promote well-being for all at all ages

Use healthcare business to sustainably contribute to improvement in people’s quality of life.

• Animal health products markets in Japan (2021) 123.7 billion yen*1 [including production animals (PA) and CA]• Health products for CA markets in Japan (2021) About 50 billion yen*2

Strategies• Health products for CA markets worldwide (2021) About 2 trillion yen*2• Goal: Global expansion of animal health products*1 Source: Ministry of Agriculture, Forestry and Fisheries “Annual Report of Sales Amount and Sales Volume of Veterinary drugs, Quasi-drugs,
Medical Devices and Regenerative Medicine Products (2021)”*2 Based on in-house research<Management resources>

Risks and Opportunities
Risks

Opportunities• The pharmaceutical regulatory data protection period(i.e., the re-examination period) *,which guarantees exclusive sales, is extremely short

Improve formulations and dosage forms and expand
target diseases in order to strengthen the intellectual
property protection network and diversify opportunities for use*Japan = six years after approval; U.S. = five years after approval; Europe = ten years after approval• The more appealing the product, the greater
the risk of competitors entering the market

Focus on technological development and marketing which leverages ISK assets and strengths to maximize added value.
Accurately tie research and development results with the needs of the end-user market in order to create value

Create business opportunities by matching excellent
existing seed ideas with the plethora of unmet needsin the veterinary medicine market

Strengths and Competitive Differentiation from Competitors• Business development that integrate the various functions of R&D, marketing, and pharmaceutical regulatory affairs management• Access to a global market centered on the U.S. and Europe• Able to develop related products for product lifecycle management; a wealth of seed ideas for new product development• Allocate human resources to ensure effective business development via a synergistic merger of R&D strengths with sales functions.
• Utilize U.S. and European business network-based product development to quickly supply each market.
• Build global alliances with highly specialized partner companies, such as CMOs/CROs and intellectual services companies.
• Utilize our expertise in pharmaceutical manufacturing that conforms to global cGMP (current Good Manufacturing Practices; U.S.
pharmaceutical manufacturing quality standards) to build and expand manufacturing collaborations with CMOs in each market.
<Current>
PANOQUELL™-CA1 obtained conditional approval from the FDA in November 2022 as an anti-pancreatitis drug for dogs. We put
this drug on the U.S. market in May 2023 through Ceva Animal Health, LLC, a leading animal drug manufacturer.
<Future>While we have multiple development focuses for animal health products, human pharmaceuticals products and medical devices which
we are pursuing commercialization of, our first focus is on developing and expanding the global market for PANOQUELL™-CA1.

31