February 8, 2023

The Teijin Group
Reforms for
Profitability Improvement
Teijin Limited
TSE Prime: 3401

Disclaimer regarding forward-looking statements
Any statements in this document, other than those of historical facts, are forward-looking statements about the future performance of Teijin and its Group companies, which are basedon management’s assumptions and beliefs in light of information currently available and involve risks and uncertainties. Actual results may differ materially from these forecasts.
The figures and indicators for the outlook for FY2022 in this document are announced on February 8, 2023.
Note
The information on pharmaceuticals, medical devices, and regenerative medical products (including products in pipeline ) included in this material is not provided for the purpose ofadvertising or medical advice.

Table of Contents

I.

Executive Summary

II.

Review of Medium-Term Management Plan 2020-2022

III. Long-Term Direction
IV. Overview of Profitability Improvement Plan for Underperforming Businesses

V. Management Structure Reform
Supplementary Information
Non-financial Indicators

1

I. Executive Summary
Prioritizing profitability improvement reform for FY2023 toward a return to growth in the future
The new Medium-Term Management Plan will be announced in FY2024

Profitability
Improvement Measures(Announced this time)◼ In FY2023, we will carry out structural reforms company-wide, focusing on improving profitability of underperforming
businesses and reforming our management structure of corporate officers and HQ staff.
◼ As a result of these efforts, we aim to improve earnings by 30 billion yen or more by FY2023.
Composites Business For the North American business, approximately 130 new profitability improvement measures on theoperational level, in addition to the measures so far, will be implemented. If the improvement
measures are not achieved, decision on whether to continue the business, including the possibility ofselling the business will be made.
Profitability
 Selecting and concentrating facilities in Europe, China, and Japan, is made, considering the
Improvement forpossibility of selling or withdrawing from these markets
Underperforming
Aramid BusinessBusinesses
 Prioritizing the stabilization of production in response to issues such as production slump, including
factory fires, and restoring earnings
Healthcare Business Setting prospects for achieving the fixed costs reduction up to the essential functional resources,
aiming for business development in areas such as rare diseases and intractable diseases
Management
Structure
Reforms

New Medium-Term
Management Plan
(to be announced in
FY2024)

Review of the management structure to promote faster management decisions and executions
 Flattening of the organizational hierarchy, halving the number of corporate officers, etc.

◼ The new Medium-Term Management Plan for the entire Teijin Group will be announced in FY2024, reflecting the resultsof profitability improvement in FY2023, restructuring the business portfolio, and growth strategies.

2II. Review of Medium-Term Management Plan 2020-2022
Summary

Strategic
Focus

Profitable
Growth◼ The financial targets failed to achieve due to significant drop in profitability of Materials Business amid
radical changes in the external environment.
◼ While certain businesses are performing on track, radical profitability improvement is necessary on acompany-wide level to avoid further decline in profitability of underperforming businesses.

Composites for automotive Our position as No.1 Tier1 supplier in North America became stronger due to proactive investments.
 Large deficit in profit continued despite cost pass-through, cost cutting, insourcing, and automation tooffset semiconductor shortages, sharp rise in raw material costs, and labor shortages.
Carbon fiber intermediate materials for aircraft The new carbon fiber plant in North America has been launched successfully.
 COVID-19 significantly delayed development of next-generation aircraft applications with Teijin’smaterials expected to be adopted.
Healthcare New Business Comprehensive Community-based Healthcare, orthopedic implantable devices, functional foods madeprogress but require more time to grow into an adequate size of business Regenerative Medicine CDMO business has been launched as an integrating area of Healthcare andMaterials
Aramid Despite an increase in production capacity, profitability significantly declined due to the cost increase outof rising price of natural gas and underperformed productivity caused by labor shortage, slump in
production, and occurrences of power outage and fire.
Resin Stable profits have been secured by shifting to high value-added products
Pharmaceuticals and home healthcare
 Cash generating ability has been enhanced thanks to takeover of the sales rights for diabetes treatments,
but product pipeline for future profits is insufficient.
 Home healthcare maintained top share of home oxygen therapy (HOT) and continuous positive airway
pressure (CPAP) therapy in Japan, while creation of new products and services wasn’t enough.

EBITDA*1(billions of yen)
150.0

Materials

25.0

Others45.0

Healthcare

85.0
21.5

80.0

50.0

FY2022

FY2022

MTP target

Outlook

13.5

FY22
MTP Target

FY22
Outlook

ROE*2

10% orhigher-4%

ROIC (basedon operating
income)*3

8% or
higher1%*1 Operating income + Depreciation & amortization*2 ROE= Profit attributable to owners of parent /Average* total shareholders’ equity*3 ROIC based on operating income = Operating
income / Average* invested capital(Invested capital = Net assets + Interest-bearing debt
- Cash and deposits )*Average: ([Beginning balance + Ending balance] / 2)

3

III. Long-Term Direction◼ About 100 years since its foundation, Teijin has foreseen society’s future needs and developed its business platform, pursuing ceaselessreform and challenges to create businesses.
◼ Teijin has sincerely faced customers and patients, building reliable quality, strong customer relations and ability to support patients andcommunities.
◼ We will deepen these strengths, overcome this difficult situation, and make a concerted effort to return to growth.

TargetPosition

Changes in the Portfolio (overview)

Challenge to new business(Composites, Carbon fiber intermediate materials,
Comprehensive Community-based Healthcare, etc.)

Downsizing commoditized material business,
shift to high value-added materials

Improving profit
Return to growth

Operatingincome

FY06

Long-term
Materiality

Image
FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25

◼ Our long-term vision to be “A Company that Supports the Society of the Future” and our “Materiality” remain unchanged.
◼ We will accelerate transformation into a company that solves important social issues in the post-pandemic world, taking advantage of ourstrength.

A Company that Supports the Society of the Future
Embodying
Long-Term
Vision

A company that protects the global environment

A company that addresses issues of patients, families andcommunities in need of more support

Sustainable automobiles and aircrafts, and energies

Diseases including rare and intractable diseases

Businesses which act as drivers for achieving the long-term vision, but require profitability improvement
Composites for automotive

AramidHealthcare*Material issues (materiality): Climate change mitigation and adaptation, achievement of a circular economy, safety and security of people and local communities, realization of healthy and comfortable living for people,
further strengthening of sustainable management base4

III. Long-Term Direction◼ We do not make any major changes to the Medium-Term Management Plan 2020–2022◼ However, the investment strategies classified into Strategic Focus and Profitable Growth are temporarily suspended◼ Composites and Carbon fiber intermediate materials have growth potential in the long-term and will be nurtured toprovide environmentally friendly solutions through customer-oriented business.

Materials◼ Aramid will pioneer the shift to a circular business over the entire value chain.

◼ Carbon fibers, Resin, and Separators will focus on an environmentally friendly strategy including recycling and use of
biomaterials.

Fibers &Products
Converting◼ Growth in growing sectors (mobility, infrastructure, global apparel) will be accelerated while promoting environmental
strategies.

Healthcare◼ Healthcare aims at a unique comprehensive healthcare company that addresses needs of every individual byproviding unique products and services based on science.

IT◼ IT Service Business Solutions Group will focus on the healthcare business, while the Digital Entertainment Group will
explore further growth opportunities.

5IV. Overview of Profitability Improvement Plan for Underperforming Businesses:

Composites

Direction◼ Further reinforcing customer relations to provide sustainable products and solutions in light of EV shift in theautomotive market.
◼ Placing top priority on a swift recovery from the deficit in profit, narrowing down investments, and reexamining
thoroughly the room for improving the profitability of the North American business comprised of many high value-added
programs.
◼ Aiming to improve operating income by +13 Billions of Yen in FY2023 with approximately 130 new improvement measuresthat have been formulated and implemented on the operational level.
◼ If the improvement measures are not achieved, decision on whether to continue the business, including the possibility ofselling the business will be made.

Key Points ofProfitability
Improvement
Plan

Profitability
improvement areain North America

Sales
Procurement
Production

North American Business
Operating Income Image

Overview of improvement measures⚫ Exiting unprofitable programs⚫ Renegotiating cost pass-through other than raw

material cost

⚫ Negotiating with/switching suppliers, reviewing

proposal request and bidding process⚫ Centralizing procurement⚫ Scaling out best practices, optimizing inventory andlogistics⚫ Integrating or partially closing production facilities

for efficient use of capacity
FY2023 total profit improvement (Billions of Yen)FY2022
Temporary
Factor*5.0
FY2022+6.0(Billions of Yen)

Profitability
Improvement
Plan

+13.0

FY2023

1.5

6.5
13.0

*Effects of the breakdown of facilities
Exchange rate : 130 Yen/US$◼ Selecting and concentrating facilities in Europe, China, and Japan, taking into account the possibility of selling orwithdrawing from these markets.

6IV. Overview of Profitability Improvement Plan for Underperforming Businesses:

AramidDirection◼ Setting KPIs to aim at 100% use of renewable energy / zero-use of oil-derived raw materials by 2050 and further
differentiating itself in sustainability by allocating resources to environmental investments◼ Strengthening top share position by increasing sales volume◼ Prioritizing the following measures to transform into a resilient business structure, and setting prospects for
future earnings recovery in FY2023
Aramid◼ Prioritizing investment necessary for improvement measures
Operating Income Image (Billions of Yen)

Key Points ofProfitability
Improvement
Plan

Rapid recovery from the impact of factory fire, stabilizing
production on existing and expanded lines, and driving
production innovation through enhanced automation*1 anddigitalization of processes mainly in the yarn spinning
process⚫

Considering sourcing raw materials from outside Europe anddispersing production facilities⚫

Stabilizing purchase price (e.g. executing forward contract)⚫

Realizing early the effects of expanded facility capacity

Productivity
Improvement
Natural Gas
Price Surge
Production/
Sales Increase

Sustainability
Initiatives⚫

Profitability
Improvement
FY2022
Plan
Temporary*2
Factor
+7.0+7.0

FY2023
FY2022*1 Operation will begin in 2024
*2 Impact of fire at raw material factory
Exchange rate : 130 Yen/US$, 140 Yen/Euro◼ Developing recycling technologies of products and promoting sales of recycled items*3 by creating recycling
system with partners◼ Adding high value through the establishment of circular businesses including the use of recycled materials*3 Sales target of recycled items in 2025: Over 5%

7

IV. Overview of Profit Improvement Plan for Underperforming Businesses:

Healthcare

Direction◼ Utilizing business platforms to license in drugs for rare and intractable diseases areas first and aiming at expanding
pipeline with new services and new medical devices◼ Aiming for monetizing the business platform as uninsured healthcare business

Key Points ofProfitability
Improvement
Plan◼ Utilizing the business platforms, cultivated as a No.1 home healthcare devices business, for pharmaceuticals of rarediseases and intractable diseases◼ Thoroughly reviewing necessary functional resources and setting prospects for drastically reduce fixed costs in FY2023(fixed cost reduction target by FY2025 : 5 billion yen)
Products/
Services

Drugs

Medicaldevices

DigitalServices

Rare disease drugs

New medical device

VitalLink(Cross-functional
cooperation)
Call centers

Strategy
Overview

Business
Platforms
Strengths

Hospitaldischarge
supportservices

Contact with patients
STEP1
Licensing drugs
Structural reforms
Maximizing the existingproducts

Network ofvisiting nurses

Cross-functionalsales team

Aim for monetizationof business platforms

Visiting
Nurse“Trust” forged through pharmaceuticals and home healthcare
STEP2
Establishing profitable
platforms with licensing

STEP3
Global niche with acquired
technologies
Building up the presence incommunity-based healthcare

8V. Management Structure Reform◼ Redefining management structure for swift decision-making and executions to resiliently respond to changes of external environment

Clarifying the roles of HQ
and Business Units◼ Clarifying responsibilities and roles through restructuring the Corporate Officer system• Shifting to the new corporate officer system consisting of the CEO and “Chief Officers”, and “Business Executive
Officers” in charge of business operation.
• Reducing the number of corporate officers from the current 30 to 15 and abolishing corporate officers (Riji).
◼ Concentrating organizations under CEO’s direct supervisory• Flattening the organizational structure, eliminating and consolidating functional Chief Officers and placing business
units under CEO’s direct supervisory by abolishing the “President position” of Materials/Healthcare Business.

Enforcement of business
operation function

 Through the structure of CEO’s direct supervisory, enforcing the creation of business strategy/planning and monitoringby HQ.
 Further delegation of General Managers of Business Units to strengthen execution power, balancing speedy execution
and risk management.

Review of HQ’s function

 Reorganizing and integrating new business development organizations in Materials and Healthcare Businesses into
New Business Development Unit under Corporate supervision.
The creation of innovation for the future through collaboration will be executed cross-functionally.
 Concentration and enforcement of the function for creations and executions of cross-company strategy, optimizing theallocation and scale of HQ staff in line with the organizational reform.
(Target fixed cost reduction by FY2025 : 4 billion yen)

9V. Management Structure Reform: Organizational Change
Before changeCEO

After change

Chief Officer (Corporate Strategy)CEO

Chief Financial Officer
Chief Social Responsibility Officer

Chief Sustainability Officer

Chief Officer (Global Business Strategy)

Chief Human Resources
Officer

Chief Information & Innovation Officer
Chief Officer (Engineering)
Consolidated
andeliminatedAbolished

AbolishedAramid Business Unit

Resin & Plastic Processing Business Unit

Resin & Plastic Processing
Business Unit

Material New Business Division
Healthcare New Business Division
Teijin Pharma Limited
Marketing & Sales Unit
Research, Development & Technology Unit

Reform of Business Units

President of
Healthcare BusinessAramid Business Unit
Carbon Fibers Business Unit
Composites Business Unit
Material Technology Center

Consolidatingand eliminating
functional chief
officers

Chief Officer(Global Administration)

Chief Officer (Legal, Intellectual Property)
President ofMaterials Business

Chief Officer(Corporate Strategy)
Chief Financial Officer

Chief Human Resources Officer

As from April 2023

Carbon Fibers Business Unit
Composites Business Unit
Healthcare Business Unit
Fibers & Products Converting
Business Unit

Flatteningorganizational
structure;
CEO’s directsupervisory

IT Business Unit
New Business Development Unit

Consolidating
New Businesses *Fibers & Products Converting GroupIT Business Group
Corporate Business Incubation Division* Material Technology Center, Materials New Business Div.,
Healthcare New Business Div., Corporate Business Incubation Div.

10

Appendix

11

Appendix) Non-financial Indicators (reducing environmental impact)◼ Keeping non-financial KPIs for reducing environmental impact set in the Medium-Term Management Plan 2020-2022 toachieve the long-term vision (One target is raised).
◼ The roadmap for achieving the long-term goals will be clearly indicated in the new Medium-Term Management Plan (tobe announced in FY2024).
Medium-Term Management Plan
2020-2022

Long-Term Targets
for reducing
environmental
impact(vs FY2018)

ClimateChange(CO2 emissions)

Our CO2 emissions(Scope 1+2)

Supply chain(Scope 3)

Water(freshwater intake
per unit of sales)

Hazardous (emissions of hazardous chemical
Substance substances per unit of sales)
Resource (landfill waste volume
Circulation per unit of sales)

Promote reductions
acrossthe entire
supply chain

30% reduction
FY2050 Net Zero Emissions
FY2030 15 % reduction
FY2030 30% improvement
FY2030 20% improvement
FY2030 10% improvement
FY2030*Latest Targets(no change)(no change)(no change)(no change)(no change)

20% improvement

by FY 2030 Avoided emissions > Total emissions
Avoided emissions
Total emissions

Suppliers

TeijinCustomers* Reduction target for emissions from sources accounting for 2/3 or more of total Scope 3 emissions (the portion of
Scope 3 emissions from all purchased products and services (Category 1), excluding trading company business)

Calculate the CO2 reduction effect in the downstream of supply chain due
to the use of Teijin products as avoided emissions, which are to be madegreater than total CO2 emissions of the entire Group and the upstream of
supply chain

12Appendix) Non-financial Indicators (Diversity & Inclusion)◼ Long-term targets have been redefined in line with the reduction in the number of Corporate Officers
made in the management structure reform.
◼ Changed the target from a number of people to ratio.
Diversity and Inclusion

Milestone

Targets

APR 2026

FY2030Female executives

20%

30%

Non-Japanese
executives

10%

30%

Employee satisfaction

1% improvement every year
(Reference: 64% in FY2022)13