Message from the President

We will seek sustainablegrowth into the
future through fourtransformations aimed
at our Vision andthe expansion of thethree growth areas ofelectronics, healthcare
and the environment.
The business environment and people’svalues are constantly changing in modern
society. Tokuyama aims to be a value-creatingcompany that uses human capital and unique
technologies to contribute to solving social
issues by implementing four transformations
to create a new business portfolio ahead of its
time. As President and Executive Officer, I will
introduce Tokuyama’s Vision and medium- tolong-term growth strategy.

Representative Director, President
and Executive Officer

8

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate DataManagement Approach

Revitalization of a free and open corporate culture that allows
cutting-edge human resources to thrive
Since I was appointed as the President and Executive Officer of
the Company in 2015, I have always been mindful of improving
corporate value. In Medium-Term Management Plan 2025,
which started in FY2021, we are focusing on implementing
effective growth strategies and transforming our businessportfolio to ensure that we evolve from an energy-consuming
company to a value-creating company that contributes tosolving social issues using our unique technologies. Although
we are only at the halfway point, it has been a major step
forward for Tokuyama to achieve a remarkable expansion of
the healthcare business among the three growth areas ofelectronics, healthcare and the environment.
The most important part of Tokuyama’s management andbusiness operations is to develop human resources, which
are the driving force of business growth, to increase humancapital through support of self-fulfillment, and to transform
Tokuyama into a youthful corporate group that embraces thechallenges presented by new businesses. Founded in 1918 in
Tokuyama-cho, Yamaguchi Prefecture (currently Shunan City),
the Company has a history spanning more than 100 years
and is what could be called a traditional company. In the
1980s, the Company had a unique and free culture that could
be described as “being among a select few” or a “group of
wandering samurai.” However, as time passes, we are seeing
an epidemic of large corporations with highly homogenous
human resources and at which it is difficult for cutting-edge
human resources to exert their abilities. In order to achieve thenext stage of growth while adapting to the rapidly changing
environment of the times, it is essential to change the mindsetof employees, who have a tendency to be stability-oriented,

to instill “Integrity, perseverance, a playful spirit and boldness,”which Tokuyama holds as one of its values. In addition, it isnecessary to establish a new system for recruiting humanresources that will enable people who are striving to solve
social issues to demonstrate leadership, and at the same time
to foster a corporate culture that respects diversity, making iteasier for junior employees, foreign employees and female
employees to fulfill their potential.
For the past few years, Tokuyama has focused onstrengthening its foundations in both management andbusiness. On the management front, we worked to establish
more transparent governance through the addition of external
directors. In April 2024, we introduced a job-based personnel
system for managers in order to realize the company’s humanresources strategy, and we have made efforts to further
enhance human capital management. I would like to emphasizethat our major achievements during this period have been ourefforts to expand our management base by making a variety ofstrategic moves toward sustainable growth in the future. On theother hand, we have focused our efforts on what we want to bein the future, including expanding the growth areas that we
expect to generate revenue for the future.
We are now in the process of building a foundation fortransformation and stepping up to a new stage to reap thefruits of that. I use the on-site experience I have gained sincejoining the Company and the knowledge I have accumulated
over the nine years as President and Executive Officer in
execution of strategy and organizational management, andI will continue to manage the Group with unwavering resolve.

Progress Status of Medium-Term Management Plan 2025

Business portfolio transformation is progressing, and achieving
targets are within range
We have continued to grow by being a product-focusedcompany developing businesses based on research anddevelopment since Tokuyama was founded. During the era of a
growing market, such as the high economic growth period inJapan, I believe this was certainly a business model that had acertain economic rationality. However, this is not necessarily
appropriate in the current era as the market matures andtechnology advances in growth areas are quickly emerging. We

are strongly urged to conduct business based on a market-in
approach, developing and marketing products and services
with a focus on customers’ needs and social issues.
Based on this understanding of the era, in 2021 we
redefined our management philosophy of having a mission“To create a bright future in harmony with the environment, in
collaboration with customers, based on chemistry.”
At the same, we formulated and announced Medium-TOKUYAMA REPORT 2024

9

Message from the President

Term Management Plan 2025, covering the five years throughsustainable cash flow in the traditional Chemicals and Cement

to FY2025. This plan discloses the vision Tokuyama is aiming
for and the processes for achieving our goals.
In Medium-Term Management Plan 2025, Tokuyama set“Transform business portfolio,” “Contribute to mitigating global
warming,” and “Practice socially responsible management”
as three priority issues. In particular, transforming thebusiness portfolio is the most important management issue
that will determine the future of Tokuyama. While generating

business segments that have supported our development for
many years, we will concentrate our management resourceson the three growth segments: Electronic & Advanced
Materials (electronics domain), Life Science (healthcare
domain), and Eco Business (environment domain). We plan toincrease the share of consolidated net sales of these growthbusiness segments to more than 50% by FY2025 and morethan 60% by FY2030.

Priority Issues in Medium-Term Management Plan 2025

Transform Business Portfolio

Increase growth businesses’ share of consolidated net sales toContribute to Mitigating Global Warming

Expedite the development/commercialization of nextgeneration energy technologies; Reduce greenhousegas (GHG) emissions (Scopes 1 and 2)

30% by FY2030

over 50%

Practice Socially Responsible Management

Step up high-priority CSR initiatives to lay thegroundwork for further growth and realize our Vision* Base year: FY2019 GHG emissions of approximately 7.26 million tonnes-CO2e

At the present time, we recognize that the progress of thebusiness portfolio transformation has been largely in line withthe plan for the final fiscal year, although it has been greatly
affected by the stagnation in the semiconductor market thathas continued since 2022. In the electronics domain, we havebegun overseas production of high-purity IPA for electronics
manufacturing, and are promoting advanced technology
development in collaboration with users in the area of thermal
management materials. In the healthcare domain, we are
increasing production capacity in order to meet the strong
domestic and overseas demand for dental materials andequipment in addition to medical diagnostic systems. The
success of OMNICHROMA®, a dental filling composite resin,
will also be a boost to growth as it has won three domestic
technical awards, including the 56th Ichimura Prize in Industry
for Distinguished Achievement. In the environment domain, a

new factory for the recycling of waste gypsum boards has
started operating in Muroran City, Hokkaido, and we are also
accelerating our efforts to commercialize solar panel recycling
technology, which is also being tested in Hokkaido. In the
future, we will continue to strengthen the foundation of our
growth businesses, and build a next-generation businessportfolio that can flexibly respond to changes in theenvironment while simultaneously improving the efficiency andmaximizing the revenue of our traditional businesses.
In addition, the quantitative targets in Medium-Term
Management Plan 2025 were reviewed in April 2023 and April
2024, due to factors such as changes in the depreciation
method1,2. The revised figures for the final year of the plan
(FY2025) have been set to net sales of ¥400 billion, operating
profit of ¥45 billion, growth rate of CAGR of 10% or more in
net sales of growth businesses, and ROE of 11% or more.

1. D ue to changing the depreciation method, the targets for operating profit for FY2025 were updated from ¥40 billion to ¥45 billion and ROE was changed from 10% to 11% (announced April 28, 2023).
2. In consideration of business performance trends and the business environment, we have changed our net sales forecast for FY2025 from ¥320 billion to ¥400 billion (announced on April 26, 2024).

10

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Contribute to Mitigating Global Warming, Practice Socially Responsible Management

We will pursue the sustainability of the global environment,
the economy and society, as well as Tokuyama
In Japanese corporate society, CSR activities have been
understood for many years as a type of social contributionthat has no direct relationship with the original business.
However, it is my belief that it is our core business itself,
working to providing unique value to a wide range ofstakeholders, including the economy and industry, the global
environment, and local communities, just as the Company
delivers products and services to customers.
In formulating Medium-term Management Plan 2025,
Tokuyama identified ten material issues that should be
addressed as priority CSR issues. These include many
initiatives related to the environment and society, including
conserving the environment, preventing accidents. preparing
for disasters, and developing products and technologies that
address social issues. In particular, the contribution to mitigationof global warming, which is treated as an independent pillar in
Medium-Term Management Plan 2025, is a necessary
condition for a company to exist in perpetuity, and initiatives
to address this are one of the major issues for increasing
corporate value. In addition to reducing the environmental
impact and energy used in the production process, we arealso preparing to introduce biomass fuels and other materials
to decarbonize our own power generation facilities. Throughthe development of technologies for various thermal
management materials and energy-saving electrolyzers,

we are taking various measures to contribute to customer
energy conservation and CO2 reduction, thereby contributing
to the conservation of the global environment and theachievement of carbon neutrality in FY2050. We have alsoestablished the Shunan Industrial Complex Decarbonization
Promotion Council with Shunan City, Yamaguchi Prefecture,
the Society for Chemical Engineers, Japan and the companies
in the industrial complex, and have formulated and promoted
the “Shunan Carbon Neutral Industrial Complex Vision,” along-term vision set for 2050. This initiative, which is being
implemented by the companies that make up the complex
and the local community, is receiving much attention from all
sectors as a model case that symbolizes the green strategy of
the chemical industry.
The ten material issues also include themes on oursustainability, such as human resource development, diversity,and job satisfaction, as well as the promotion of mental andphysical health. Innovative products and services are generated
from a vibrant organizational culture that respects diverse
values. We will further evolve our unique value creation
process through Tokuyama’s human capital and health andproductivity management. We will also contribute to thedevelopment of global industry and the formation of asustainable society by sincerely responding to the ten material
issues that are visualizations of our Vision.

TOKUYAMA REPORT 2024

11

Message from the President

Transforming the Company to Embody Our Vision

Active injection of management resources into the “fourtransformations” of organizational culture, R&D, DX, andinternational expansion
Tokuyama is currently using the Group’s combined strength totake on the challenge of the “four transformations,” with aview to realizing our redefined mission and achieving the goalsof Medium-Term Management Plan 2025.
The first is to reform our organizational culture. Looking
back on Tokuyama’s history, from the early days of theCompany when it supported Japan’s industrial development
through to the 1980s, when the Japanese economy entered aperiod of stable growth, it seems that the frontier spirit onwhich the Company was founded was shared with employees
as the DNA of the organization and passed on to the next
generation. The open organizational culture and open
discussion among employees led to numerous innovations
that contributed to the development of industry and therealization of an enriched lifestyle.
However, our journey from there has not been a smoothone. Accumulated successes push employees’ awareness inan affirmative direction, and the values that favor precedent
reduce the creativity of an organization. Middle managers,
who will become the next generation of leaders, were also
particularly aware of the trend. In order for Tokuyama tocontinue to take on the challenge of creating new value,
I believe it is essential to change the mindset of middle
management and to restore the former vitality within theorganization. I have been focusing on reinvigorating our

12

TOKUYAMA REPORT 2024

organization and improving productivity by ensuring diversityof human resources through their appropriate allocation andsupport, as well as the active use of career recruiting, etc.
The culmination of these initiatives is the job-based
personnel system for managers that was introduced in April
2024. In the design of the new system, the core mandate wasthat human resources with a high level of expertise and achallenging spirit lead organizational change as managers,
and that they will drive the transformation of our businessportfolio and the qualitative evolution of our businessstructure. We hope that the new system, carefully designedwith expertise and challenging minds as its core, will be a key
factor in strengthening our organizational capabilities.
The second transformation is to strengthen R&D.
Advanced and original R&D is the lifeblood of Tokuyama andis the source of our competitive advantage in the market.
Pioneer engineers, who have been driving the growth of ourbusiness through to the present, have succeeded in creating
new technologies and products and commercializing them bybeing devoted to their own research themes with every fiberof their being. In order to develop this tradition and pass it on
to the next generation, it is necessary to implement substantial
R&D investment and to further enhance the R&D system. In
2023, we reviewed our current R&D themes and in April 2024
we redesigned our marketing functions. In view of the fact that

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

short- and medium-term marketing should be carried out at

IoT in a wide range of target areas, including the enhancement

the location closest to customers, we have establishedmarketing functions in our business divisions, and the R&D
Division has a new system that focuses on planning strategies
and research on long-term themes with a view to five or ten
years later.
In the future, business divisions and corporate R&D teams
will work to strengthen their respective foundations, and bycombining the functions of both companies organically andseamlessly, they will select themes desired by the market,
speed up the development of new products, and optimize thetime to market. In addition, the New Business Center (currently
the New Business Division), established in 2022, will be thecore organization for the commercialization of our new
technologies such as alkaline water electrolysis, and thiscommercialization will be implemented in parallel withtechnology development and business planning. Moreover,through collaboration with external research institutions,
universities, and other companies, and through open
innovation, we will actively work to create new value that isdifficult for individual companies to handle alone.
The third theme is to promote DX (digital transformation).
Using digital technology to improve operational efficiency is not
the only thing that DX does. We will introduce the latest AI andof supply chains and the improvement of productivity at
manufacturing sites, to innovate business and production
processes, foster advanced human resources, effectively utilize
human resources, and improve competitiveness across ourbusiness activities in general.
With regard to the acceleration of international expansion,
which is the fourth transformation, we have adopted the policyof continuing to expand our overseas operating bases inorder to enhance Tokuyama’s presence in the global market.
Basically, we intend to work in areas that have growing
regions and markets. However, going forward in the materials
business, not only is it important to be able to achieve costadvantages, but also to be able to achieve sustainableproduction, such as through the use of green power. In Japan,
we will develop high-value-added products that can be
profitable, and we will promote the establishment of production
bases and the improvement of supply chains overseas,
where low-cost, clean environments are expected. This is
Tokuyama’s global strategy, in which we aim to achieve a
percentage of consolidated overseas net sales of 50% ormore. In our global expansion, we believe it is essential toadvance our efforts by monitoring medium- to long-termsocial trends.

A Message for Our Stakeholders

Aiming to be a value creation company that contributes to therealization of a sustainable society
Although I have conveyed a harsh perception of Tokuyama’s
corporate culture and the current state of its business, I am by
no means pessimistic about the future of the TokuyamaGroup. We have many diligent employees, all of whom aresincere and genuinely committed to their daily work. With theappointment of talented internal personnel and the expansionof the invitation of external directors, the effectiveness ofcorporate governance and the transparency of management
have been greatly enhanced. Furthermore, as mentioned
earlier, the introduction of a new personnel system has given
us a clear path to improving our human capital. I believe that
Tokuyama has unlimited potential as an advanced value
creation company. As President and Executive Officer,
I believe it is my responsibility to ensure that Tokuyama’s
potential is fully realized, and that this potential is translated
into business results and favorable business performance.
The business environment surrounding the Japanesemanufacturing industry will continue to be challenging, as

global geopolitical risks increase, resource and energy prices
soar, and human resource difficulties and labor shortages arebrought about by a decline in the domestic population. In thisuncertain environment, we will use our unique technologies
and solid human capital to break new ground in the chemicalindustry and to further ensure the development of Tokuyama.
In addition, we will work to bring together the wisdom of ourGroup’s employees to promote Medium-Term Management
Plan 2025 and to ensure that the four transformations allow
us to make a leap forward in becoming a value creationcompany that contributes to the realization of a sustainable
society through unique technologies.
We would like to thank all our stakeholders including
shareholders, investors, customers, business partners, local
communities and Group employees for their continued
understanding and support.

TOKUYAMA REPORT 2024

13

Value Creation Process
The Tokuyama Group is contributing to resolving social
issues through business operations and to creating asustainable future, in line with our Mission. These steps
are highlighted in the Value Creation Process.

To create a bright future iin collaboration with custMissionVision• Be a value-creative company that places first priority on R&D and marketing• Be a company that never stops challenging new domains while refining and exploiting its
unique strengths• Be a company with healthy employees who have healthy families and take pride in their workat their company• Be a company that fosters bonds with people in communities and societies worldwide

Toward Tokuyama’s S

InputsBusiness Model

Stable financial base• Total assets: ¥457.3 billion• Net assets: ¥259.9 billion
Financial
Capital• Interest-bearing debt: ¥105.7 billion

Tokuyama’s
Strengths

Steps towardachieving our Vision• Equity ratio: 54.5%• Rating: A * R&I Issuer Rating
Regionally oriented manufacturing base
• A base that can respond quickly to the needs of thesemiconductor market

Manufactured
Capital• Number of production plants: 28 in Japan,
8 overseas• Capital expenditures: ¥29.7 billion•D X investment: Up to ¥10 billion (planned for thefive years from FY2021)

Technologies and manufacturing processes
developed over more than a century
A system that links marketing with R&DIntellectual
CapitalUniquetechnology/
manufacturing
processes• R&D expenses: ¥14.4 billion• Number of patents held: 2,730

Strengthen
R&D

Manufacturingbases formore efficient
production

Promote DX

Human resources with a common sense of values• Consolidated employees: 5,734• Training expenses (per individual employee):
Human Capital¥26,000

Restructure theorganizational
cultureAccelerateinternational
expansion

Zero waste
emissions

A network of customers and business partners
that we have cultivated• Number of countries and regions where our products
are sold: 40*• Many collaborative research achievements
Social Capital• Cooperation with government and in the Shunan
Industrial Complex* Non-consolidated data

Materiality• Environmental investment: ¥18 billion (planned
for the three years from FY2024)• Energy input: 55,325 TJ
Natural Capital• Water resources input*: 39,051,000 m3• Recycled waste: 370,000 tonnes* Excluding seawater used for coolingSociety
Accelerated change in industrial
structure, rapid digital revolution

Jap

Domestic dema
growing healthManagement
14

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Progress of Growth
Strategy

Value Creation Strategy

Management for Sustainable
GrowthCorporate Datain harmony with the environment,
tomers, based on chemistry
Values• Commitment to customer satisfaction as a profit source• A broader, loftier perspective• Employees who consistently surpass their predecessors• Integrity, perseverance, a playful spirit and boldness

Sustainable Growth

Outputs

Outcomes
Customers
Supply products and services required
throughout society

Research anddevelopment capabilities
Marketing strengths

Electronic &Advanced Materials• Maintain performance of advanced electronicequipment and energy savings• Improve quality of life with better health andpreventive care
• Net sales¥341.9 billion¥25.6 billion• Operating profit

Suppliers

Traditional
Businesses

Create new value through collaboration• Formulate multi-stakeholder policies• Supplier evaluations

173* All data is non-consolidated

Chemicals
Advance unique technologies,
explore new technologies,
improve productivity andexpand overseas

Transforming
the businessportfolio

Employees
Life
Science

CementProvide a fulfilling, friendly working
environment• Selected as a KENKO Investment for Health forthe second consecutive year
• Received Platinum Kurumin Certification• Employee engagement (response rate) 94.7%* All data is non-consolidated

Shareholders and investors
Increase corporate value throughgrowth and dividends

DX
Utilization of humancapital• Current net income attributed to shareholders of
the parent company
¥17.7 billion

Eco Business¥5.7 billion
117.7%• Engagements with institutional investors  223• Total dividends

• Total shareholder return (TSR)

Communities and society
Contribution to science and technology• Amount subsidized by Tokuyama Science
Foundation*:
Approx. ¥1.30 billion* Cumulative amount for the period from 1988 to 2023

Governance
Respond to various expectations, requests
and demands from stakeholders,and constantly strive to improve

Environment
Reduction of environmental impact• GHG emissions (Scope 1 and 2) reduction rate(compared to FY2019):
13.0%• Water usage reduction rate*(compared to FY2019):
18.5%• Effective waste utilization rate:

panand shrinkage,h consciousness

Planet Earth

92.0%* Excluding seawater used for cooling

Growing environmental
consciousness, environmental
regulatory tightening

challenges
TOKUYAMA REPORT 2024

15

Tokuyama’s Strengths Supporting Value Creation
Since Tokuyama was founded in 1918 with the purpose of the domestic production of soda ash, it has grown as
a comprehensive chemical manufacturer through the in-house development of a variety of technologies. We are
currently developing businesses based on our strength of having an efficient production system based on products
created through unique technologies and the characteristics or our business, mainly in the Electronic & Advanced
Materials business that support cutting-edge semiconductor manufacturing, as well as Life Science and Eco
Business. In addition, the Tokuyama Factory, which is our main manufacturing site, is aiming for zero emissions ofwaste by ensuring the reuse of byproducts and waste.

Uniquetechnology/
manufacturing
processes

Manufacturingbases formore efficient
production

Zero waste
emissions

Transforming our business portfolio by leveraging and deploying unique technologies
Tokuyama has strengths not only in inorganic chemistry, thebusiness on which it was founded, but also in analyticalchemistry and organic chemistry. We utilize our unique
technologies to differentiate our products and develop new
products as shown in the figure below.
Ion-exchange membrane and electrode technology, which
is primarily used in salt production, refining and producing
food, and the recovery of certain valuable resources, is one of
Tokuyama’s unique technologies. Advanced functions such as
selective permeability, which allows only the target substanceto pass through, enable the separation of substances
according to the application. By making full use of membranes
with different properties, we have applied them in various
fields, including the development of hydrogen production
equipment, which is expected to become the next-generationenergy source, and anion conductive membrane for waterelectrolyzer and H2 fuel cell.
Tokuyama has been involved in the development andmanufacture of powders such as silica and aluminum nitride(AℓN), and has strengths in powder control technologies suchas particle shape control and surface treatment. In electronics,
we provide products with unique features to the market inaccordance with customer needs such as filling in resins andhigh-level functionality composite materials. We are developing
boron nitride (BN), with its unique scale-like shape, forapplications in life science in addition to electronics.
To transform our business portfolio from the traditional
businesses of Chemicals and Cement to the growthbusinesses of Electronic & Advanced Materials, Life Scienceand Eco Business, we will further utilize and widely deploy theunique technologies that we have refined over many years.

Utilization of Unique Technologies
Chemicals

Ion-exchange
Membranes andElectrodes

High-Purity / HighSensitivity Analysis
Technology

Powder Control
Technology(Particle ShapeControl/Surface
Treatment)

Composite andMolding Processing
Technology

Electronic & Advanced Materials

Eco Business• Photoresist developer for
semiconductors• Ion-selective electrode (A&T)• Electrodialyzer (ASTOM)• Ion-exchange membrane(ASTOM)• Anion conductive membrane
for water electrolysis• Alkaline water electrolyzer• Pharmacopoeia and foodadditive products• Polycrystalline silicon• High-purity IPA for electronics
manufacturing• Fumed silica• High-purity boron• High-purity chlorosilane• APIs and intermediates inpharma• Medical diagnosis systems(A&T)• Photovoltaic panel recycling /silicon recycling• Fumed silica• Sol-gel silica• Hollow silica• Aluminum nitride• High thermal conductivity
filler/AℓN, BN• Silicon nitride• Dental materials andequipment (TD)• Spherical silica aerogel• Boron nitride / for cosmetics• Biomass silica• Waste gypsum board
recycling (TCG)• Layered sodium silicate• Cement
products• Construction
materials• Aluminum nitride ceramics(TDPM)• Machinable ceramics• Silicon nitride ceramics• Vinyl chloride monomer• PVC resin• Propylene oxide• Chloromethane• Chemicals for advanced
semiconductors• Photochromic materials foreyeglass lenses• APIs and intermediates inpharma• Dental materials andequipment (TD)• Polyrotaxane (ASM)• Radiation protection material• PVC compound (SAK)• Magnesium hydride• Thermal management
materials• Photochromic materials foreyeglass lenses• Microporous film
• Dental materials andequipment (TD)

Note: The company names (partially abbreviated) are shown for technologies that are only implemented by subsidiaries.
FLT: FL Tokuyama, SAK: Sun Arrow Kasei, TCG: Tokuyama Chiyoda Gypsum, TD: Tokuyama Dental, TDPM: TD Power Materials

16

TOKUYAMA REPORT 2024

• Products under development

Life Science• Salt electrolysis/caustic
soda, chlorine, hydrogen

Ceramic Sintering
Technology

Molecular Design /Synthesis Technology• Products
Cement• Ion-exchange membrane(ASTOM)• Plaster products (FLT)• Anion conductive membrane
for water electrolysis

Tokuyama Value Creation

Value Creation Strategy

Management for Sustainable
GrowthProgress of Growth
Strategy

Corporate Data

Efficient production sites based on business characteristics
factories capable of integrated production from raw materials
to high-purity IPA for electronics manufacturing, which is used
to clean semiconductors, in Taiwan and South Korea, where it
is utilized. Full-scale operation has begun in Taiwan, and we
aim to commence commercial operation in South Korea. In
Singapore and China, we have established a system in which
products supplied from the manufacturing sites are filled andshipped to each customer, providing detailed customer
support.
Our main manufacturing site for Life Science is the
Kashima Factory (Kamisu City, Ibaraki Prefecture). The factory,
which has good access to Narita International Airport, ships
high value-added products, such as dental materials andequipment, to more than 90 countries and regions worldwide.

Tokuyama has 28 manufacturing bases in Japan and8 overseas.
The largest site is our Tokuyama Factory (Shunan City,
Yamaguchi Prefecture), which boasts a total area of 1.91
million square meters. Utilizing the adjacent public wharf andover 20 company berths, we receive raw materials such as
raw salt and limestone, manufacture mainly so-called bulk
products such as caustic soda and cement, and efficiently
ship them within Japan.
The Tokuyama Factory is also our main manufacturingbase for electronic & advanced materials such aspolycrystalline silicon, but we are proceeding to establish
overseas production bases with an eye on the expansion of
the semiconductor market in Asia. As shown in the figure
below, in addition to the Tokuyama Factory, we have built

Production Sites for High-Purity IPA for Electronics Manufacturing
Korea (STAC)

Production/sales from raw materialsP roduction/sales from supplies received frommanufacturing bases• Entering markets where strong demand
expected• Responding to high quality requirements

Japan (Tokuyama)• Responding to domestic demand growth• Serving as a support base for each region,
including human resources/technology

China (Tokuyama Chemicals (Zhejiang))• Stable supply to growing markets

Singapore (Tokuyama Singapore)• Sole local supplier• Expanding sales to markets where further
growth expected

Taiwan (FTAC)• Expanding sales to meet strong demand• Supporting customers’ cutting-edge
production lines with higher quality

Zero Waste Emissions Utilizing Cement Plants* TDX: Tokuyama DX

Open Integration
Tokuyama Polypropylene Co., Ltd.

C3’

Shunan Industrial
Complex

PO
VCM

IPA
NF

O2

N2

PVC

Chlorine
derivatives

Cl2

NitrideMaterials

CoorsTek Tokuyama Corporation

C2’

Polycrystalline
siliconSodium silicate
pre-feedSaltelectrolysis

NaOH

H2H2

Local
communities

Power plant
Internal
waste
External
waste

Fumed silica

Yamaguchi Liquid Hydrogen Co., Ltd.

Tokuyama Factory is a unique manufacturing sitewhere utilities such as electricity and steam
generated by in-house power generation facilities
and materials such as chlorine and hydrogen
derived from the salt electrolysis plant are supplied
to other plants for effective utilization. Waste
generated at each factory is recycled as raw
materials for cement at the cement plant, and theeffective utilization rate of waste in FY2023 was
94.2% for Tokuyama on a non-consolidated basis.
The zero emission rate of waste related to landfill
disposal was 99.8% on a non-consolidated basis
in FY2023.
This highly integrated production system is thesource of our competitiveness, but adjustments
need to be made based on various factors,
including the operating conditions of each plants.
We are promoting operational reforms based on
TDX* in order to achieve the goals of MediumTerm Management Plan 2025, and are working tofurther improve productivity and efficiency at the
Tokuyama Factory.

Soda ash

CementYamaguchi
Eco-tech Corporation

Limestone

Coal

PKS/Waste tires

Raw salt

Metallic silicon

TOKUYAMA REPORT 2024

17

Message from the CFO

While maintaining sound financial discipline,
we will concentrate Tokuyama’s management
resources in the three growth areas ofelectronics, healthcare, and the environment
to support our sustainable growth from afinancial perspective.
Hideo Sugimura
Representative Director,
Senior Managing Executive Officer

Towards Management That is Conscious of the Cost of Capital and Stock PriceIn April of this year, Tokuyama announced its policy to focus on
management that is conscious of the cost of capital and its
stock price. Our basic policy is to steadily implement MediumTerm Management Plan 2025, which includes four specificmeasures: (1) Enhancement of shareholder returns, (2) Focusedinvestment in growth businesses and review of existing
businesses by actively utilizing ROIC (return on invested capital),(3) Reduction of strategic shareholdings, and (4) Dialog withshareholders. We will continue to pursue further improvementof corporate value by maintaining a certain degree of financial
discipline, achieving medium- to long-term growth throughstrategic investments for the future, and executing capital
policies that take into account the interests of our stakeholders.
In particular, we intend to evaluate and analyze the current
status of our growth businesses and make decisions related tothe sustainability of existing businesses by compiling threefinancial tables for each business unit and referring to ROIC.

Review of FY2023 and Outlook for FY2024
In FY2023 (ending March 31, 2024), we fell short of ouroriginal plan (formulated at the beginning of the year) due tothe sluggish semiconductor market, but we were able toincrease profits after five consecutive fiscal years of declining
profits due to appropriate measures such as raising selling
prices. In September 2023, we made an early repayment of asubordinated loan of ¥60 billion. This redemption eliminatedthe refinancing restriction clause and expanded the flexibilityof the capital policy. In addition, we have been able to reduce
short-term borrowings, and cash reserves are returning to an
appropriate level.
In FY2024 (ending March 31, 2025), we expect semiconductor
market conditions to recover, but we also see some concerns,
such as high raw material prices. In this context, we expect tosee growth in net sales, ordinary profit, and profit attributableto owners of the parent, as the benefits of the Group’s efforts
to strengthen profitability, appropriate sales price policies, andstrategic investments centered on growth businesses, which
we have been focusing on, are expected to materialize.
We will continue to pursue a flexible financial strategy andcapital policy, keeping a close eye on ROE, which indicatesmanagement efficiency, and PBR, which is a measure ofcorporate value, in addition to our ability to generate cash.

18

TOKUYAMA REPORT 2024

Capex Plan Breakdown (FY2021–2025)■ Growth businesses■ Rationalization / Energy savings /CO2 emission reductions■ Infrastructure for growth■ R&D■ Traditional businesses■ Others
Investments¥200.0billionAt the timeof planformulation¥160.0billionCurrent
outlook

Keywords are priority investment in growth fields,
reduction of CO2 emissions, and energy savings
Major Capex Results• Construction of the factory of joint
venture company in Taiwan for
high-purity IPA (FTAC)• Construction of the factory of joint
venture company in Korea forhigh-purity IPA (STAC)• Production capacity expansion ofdental materials• Waste gypsum board recycling
business Construction of a new plant in
Muroran• Establishment of the Center forCommercialization of Advanced
Technology• Investment related to biomass co-fired
generation in power plants

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Financial and Capital Strategy to Lead to Successful Business Portfolio Transformation
Since experiencing an impairment loss related to Tokuyama
Malaysia in FY2015, we have focused on establishing soundfinancial strength by carefully selecting capital expenditures andlimiting the amount of investment to within the operating cash
flow. As a result, our ability to generate cash as well as
tolerance for interest-bearing debt have both been heightened,
and we have succeeded in building a solid financial base,providing funds to support growth investments with a mediumto long-term view. Based on these results, in Medium-Term
Management Plan 2025, which concludes in the fiscal year
ending March 31, 2026, we established “Transform businessportfolio,” “Contribute to mitigating global warming,” and“Practice socially responsible management” as our three priority
issues. Among these issues, aggressive investment in growthbusinesses is essential to promote the transformation of thebusiness portfolio. While maintaining a sound and stablefinancial base, we will pursue continued growth into the future

by concentrating management resources in the three growthareas of electronics, healthcare, and the environment.
We will inject adequate capital after thoroughly reviewing
into DX to support our business model transformation, as wellas human capital and R&D, our sources of corporate
competitiveness. For large-scale projects such as M&A, we willthoroughly assess the timing of investment effects in advanceand continue monitoring with ROIC as an indicator after the
M&A is completed, aiming to create comprehensive synergies
and contribute to the business performance of acquired
businesses as soon as possible. In addition, with regard to
R&D, which is the lifeline of a manufacturer, we will implement
efficient development activities with an awareness of costs andexits (business divisions launching products) to further ensure
our evolution into the “value-creative company,” that we areaiming for.

Toward Further Enhancing Shareholder Returns
Tokuyama’s basic policy for returning profits to shareholders is
to increase shareholder value through steady profit growth
while maintaining stable dividends. In particular, we recognizethat the next five to ten years will be a phase of upfront
investment, and therefore, that it is vital to execute an effective
investment strategy that utilizes retained earnings to increase
EPS. We will carefully consider share buybacks, which areoften employed as a method to improve ROE, while maintaining
awareness of PBR. In order to raise ROE above the cost ofequity capital, we will deepen dialog with shareholders andinvestors, and aim to obtain an appropriate evaluation thatreflects the reality of the Company by accurately communicating
the Group’s superiority and the value it provides, both in financial
and non-financial terms.

A Few Words for Our Stakeholders
The Group has achieved sustained growth on the strength ofits stable financial base. As CFO, I am proud that our soundfinancial position and balanced revenue structure have earned
us the trust of our stakeholders. However, the businessenvironment never ceases to change along with the times. In
order for Tokuyama to continue to develop as a value-creative
company, it is necessary to actively invest management
resources into making traditional businesses highly profitable,
fostering growth businesses, and expanding our management
structure.
I have overseen Tokuyama’s finance and accounting alongwith corporate management and more since I was appointed

General Manager of the Corporate Planning Division in 2019.
I recognize that the responsibility of the CFO is to maintainand strengthen the financial base, which is the backbone ofcorporate management and the source of trust, and tosupport the sustainable growth of the Group from a financial
perspective. We will continue to drive the Tokuyama Group’s
sustainable growth from a financial perspective and strive tocreate a corporate group that is trusted by all stakeholders.
We ask for your continued understanding and support of
Tokuyama’s management vision and financial measures.

Cash Flow Generation and Allocation
Reduction of strategic
shareholdings

Operating Cash FlowFY2024 Forecast• Screen prospective
investments• Reduce inventory

Cumulative ¥200.0 billion over 5 years• Earnings growth• Cash flow fromnew products* At the time of plan formation: ¥250.0 billion

・FY2021 and 2022: Slump in operating
cash flow
・Continuation of disciplined investment

Capex

Strategic Investment

Shareholder Returns(M&A, new business development)¥160.0 billion

Max ¥30.0 billion* At the time of plan formation:¥200.0 billion

Including joint venture in Malaysia

3% DOE

Dividends
30% payout ratio

Consider acquisitionof own sharesTOKUYAMA REPORT 202419