TOKUYAMAREPORT
2024
Fiscal year ended
March 31, 2024
Integrated ReportOur Value
Tokuyama Value Creation Story

Creation Story
MissionTo create a bright future inharmony with the environment,in collaboration with customers,
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 andboldness

FY2021The Path to Realizing Our Vision
Through the steady transformation of our business portfolio, Tokuyama is
contributing to mitigating global warming, and practicing socially responsible
management as stated in Medium-Term Management Plan 2025, and we aremaking progress in realizing our Vision and toward becoming a value-creative
company.
We will strive for sustainable business growth by leveraging human capitaland sharing our Mission and Values.

Medium-Term
Management
Plan 2025
See p. 20
for details

FY2025
Transform Business Portfolio

Contribute to Mitigating
Global Warming
Practice Socially Responsible
Management

Tokuyama Value
Value Creation
CreationTokuyama

Value Creation
Creation Strategy
Strategy
Value

Progress
Progress
ofof
Strategy
Growthby
Business
Strategy
Segment

Management for Sustainable
GrowthCorporate Data
Data
Corporate

VisionBe a value-creative
company that places
first priority on R&D andmarketing

Be a company thatnever stops challenging
new domains whilerefining and exploiting
its unique strengths

Increase the shareof consolidated net
sales from growthbusinesses to

60% ormore
Be a company withhealthy employees who
have healthy families
and take pride in theirwork at their company

Percentage ofconsolidated overseas
net sales

50% ormore

GHG emissions(Scope 1 and 2)

Be a company that
fosters bonds with people
in communities andsocieties worldwide

30% reduction*▼
Achievement ofcarbon neutrality by
FY2050

FY2030
Increase growth businesses’ share of consolidated net sales toMateriality

See p. 40 for details

over 50%

Expedite development/commercialization of next-gen
energy technologies
Reduce GHG emissions (Scope 1 and 2) 30%* by FY2030• Helping to fight global warming• Engaging with local communities• Conserving the environment• Promoting CSR procurement• Preventing accidents andpreparing for disasters• Developing human resources• Developing products and technologies
that address social issues
Step up high-priority CSR initiatives to lay the groundwork forfurther growth and to realize our Vision•P romotion of diversity andcareer fulfillment• Promotion of physical/mental health• Improved chemical management andproduct safety* Base year: FY2019 GHG emissions of approximately 7.26 million tonnes-CO2e

TOKUYAMA REPORT 2024

1

The Path to Value Creation
Historical Background and Social Issues• The Great Depression (1929 to 1941)• World War I (1914 to 1918)• World War II (1939 to 1945)• Environmental pollution problems• Japanese economic miracle (1955 to 1973)

Since our founding in 1918, Tokuyama has worked to accumulate technologies and create new products bydeveloping our inorganic chemicals business, while, from the 1970s, we began addressing social issues by
expanding the scope of businesses, mainly in organic and polymer chemistry. We are continuing to refine thetechnologies that have become the cornerstone of our growth over more than a century, as we strive to create
new value that meets the requirements of the coming age.

Net Sales / Operating Profit
Net sales

Strengthened
environmental
measures

Operating profit

Growth businesses

Traditional businesses

Electronic &Advanced Materials

Chemicals hanged production processCof caustic soda

CementLife Science esponded to booming demand forRcementEco BusinessEnteredthe petrochemicals businessand contributed to improving lifestyles
and developing infrastructure

Produced soda ash domestically sed byproducts from sodaU
ash production as raw
materials for cement

1918

1930

1950

1960

Tokuyama Value Creation

Tokuyama’s PathJapanese industrial development backed by domestically
produced soda ash
Established the foundation for the soda business

1918

1952

Nihon Soda Kogyo Co., Ltd.
(currently Tokuyama Corporation)
was established
Soda ash plant was constructed inTokuyama-cho, Yamaguchi
Prefecture (currently Shunan City)

Began production of high-quality
caustic soda using an electrolytic
process
Panoramic view of the company
around 1919

1924
First shipment of caustic soda (ammonia-soda process)
1927
First shipment of soda ash

Electrolyzer

Nanyo Plant was constructed
Began cement production using alarge kiln
1964Entered the petrochemicalbusiness
Entered the PVC business
Opened the East Plant to enter theion-exchange membrane business andto expand the petrochemical businessCentral power plantcompleted
Cement plant completed andproduction started

1960

Nanyo No. 1 Kiln (Mammoth Kiln)

1967

1938

1938

2

Strengthened our facilities and converted our manufacturingmethods in response to the needs of society
Diversified businesses to evolve into a comprehensive
chemical manufacturer

Cement Tokuyama Plant

PVC plant

1972
Started production of isopropyl alcohol using direct hydration process

1940

1975

Began production of calcium chloride

Began production of caustic soda using a diaphragm process

TOKUYAMA REPORT 2024

1970

Tokuyama Value Creation

Progress of Growth
Strategy

Value Creation Strategy

Management for Sustainable
GrowthCorporate Data

• COVID-19 pandemic• Declining birthrate and aging population in Japan• Digital revolution (from 1995)• Bankruptcy of Lehman Brothers (2008)• Japanese asset price bubble (1986 to 1991)• Kyoto Protocol (1997)• Adoption of the Sustainable Development Goals or SDGs (2015)• Oil shocks (1973, 1979) ushed ahead with
P
zero-emission policies
and resource recycling hifted toward energy
S
conservation

 ctive investment inA
new businesses xpanded businessesE
globally and created
new businesses nhanced competitive powerEby integrating businesses andspinning off companies

FY2023 Net sales¥341.9 billion

 ntered high value-added fields,Esuch as electronic materials andfine chemicals

FY2023 Operating
profit¥25.6 billion

1980

1990

2000

Expansion of new businesses such as specialty and processing
types, and more overseas operations underpinning our growth
as a global company

1978 Entered the dental materials and equipment business1982 Entered the fine chemicals business1983 Entered the diagnostic systems business1984 Entered the high-purity polycrystalline silicon business1985 Entered the high-purity aluminum nitride business2001 E stablished Tokuyama Dental by spinning off of the dental materials
and equipment business
2004 Spin off the ion-exchange membrane business to integrate with ASTOM
2005
Established Tokuyama Chemicals(Zhejiang) to meet the growing global
demand for fumed silica
Tokuyama Chemicals (Zhejiang)

Established Tokuyama Chiyoda
Gypsum (waste gypsum board
recycling business)

Opened Kashima Factory as amanufacturing base for finechemicals

2020
Kashima Factory

Established the Tsukuba ResearchLaboratory as a base for thedevelopment of specialty businesses

Established Formosa Tokuyama
Advanced Chemicals (FTAC) to respondto needs for high-purity IPA

Formosa Tokuyama Advanced
Chemicals (FTAC)

2021 E stablished the Center for Commercialization of Advanced
Technology in Yanai City, Yamaguchi Prefecture
Made A&T (diagnostic systems company) a wholly owned subsidiary

1989
Established Tokuyama America,
established Tokuyama Europe

2023

Providing new value in the fields of electronics, healthcare,and the environment
Aiming to transform into a value creation company

2011

1985

1989

2010

Tsukuba Research Laboratory

1996 ‌Established the current Tokuyama Singapore and Taiwan
Tokuyama as manufacturing and sales bases for high-purity
IPA, etc.

2022 E stablished STAC (manufacturing and sales of high-purity
IPA) in South Korea
2024 Opened the No. 2 Tsukuba Research Laboratory

TOKUYAMA REPORT 20243

Tokuyama Value Creation
Tokuyama Will Create New Value in Harmony with the Environment by Supplying Products That
Address Social Issues.

Tokuyama at a Glance

Our product lines anddemonstrating prowessin various markets

Semiconductor-grade
polycrystalline siliconHigh-purity IPA1 forelectronics
manufacturing

Fumed silica for CMP2

その他の地域153億円

SiliconOverseas Sales
Companies,
etc.

ICchemicals

Recycling

Other

Waste processing

High-purity
aluminum nitride

12%
Electronic &Advanced Materials

22%

CementCement19%

SilicaConsolidated Net Sales

Fine
Chemicals¥341.9 billion(FY2023)

Cement

ThermalManagement
Materials

Microporous
Film
DentalMaterials
andEquipmentLife Science

12%

Eco Business2%

MedicalDiagnosis
Systems
Environment

Chemicals

33%

Chlor Alkali
and Vinyl Chloride

Soda
Ash and
Calcium
Chloride

Ion-Exchange
Membranes

Photochromic materials
for eyeglass lenses

Caustic soda

OMNICHROMA®
dental fillingcomposite resin
PVC resin
Soda ash

1. IPA: Isopropyl alcohol
2. CMP: Chemical mechanical polishing

4

TOKUYAMA REPORT 2024

Waste gypsum board
recyclingTokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Electronic & Advanced Materials

Competitive products used insemiconductor manufacturing processes
Semiconductor-grade
polycrystalline siliconHigh-purity IPA forelectronics manufacturing

Fumed silica for CMP

High-purity aluminum
nitride powder

20%

Tier 1

No. 1

No. 1

worldwide share

manufacturer

worldwide shareworldwide share

Typical products

Typical applications

Typical products

Typical applications

High-purity polycrystalline
siliconSemiconductor-grade
silicon wafers

Fumed silica

CMP slurry

High-purity IPA forelectronics manufacturing

Precision cleaning ofsemiconductor wafers
and electronic devices

High-purity aluminum
nitride powder

Components forsemiconductor
manufacturing equipment

Life Science

Eco BusinessPhotochromic materials foreyeglass lenses

Dental materials andequipment

The world’s first waste gypsum board in a non-kiln
resource cycle

20%

94

100%

No. 2 worldwide share

Countries andregions with sales

Fully recycled

Typical products

Typical applications

Typical products

Typical applications

Photochromic materials
for eyeglass lenses

Photochromic lens

Dihydrate gypsum(continuous large
recrystallization
technology)

Gypsum board

Dental fillingcomposite resin

Dental treatment

TOKUYAMA REPORT 2024

5

Contents

Section1

Tokuyama Value Creation

Section2

Value Creation Strategy

Section3

Our Value Creation Story��������������������������������������������������������������������������������������� 1
The Path to Value Creation���������������������������������������������������������������������������������� 2
Tokuyama Value Creation�������������������������������������������������������������������������������������� 4
Contents/Editorial Policy���������������������������������������������������������������������������������������� 6

Message from the President������������������������������������������������������������������������������ 8
Value Creation Process����������������������������������������������������������������������������������������14
Tokuyama’s Strengths Supporting Value Creation��������������������16
Message from the CFO����������������������������������������������������������������������������������������18

Progress of Medium-Term Management Plan 2025���������������20

Progress of Growth Strategy

Growth Drivers��������������������������������������������������������������������������������������������������������������30
Dialog with Employees������������������������������������������������������������������������������������������36

Message from the Executive Officer
in Charge of Sustainability���������������������������������������������������������������������������������38
Vision and Materiality����������������������������������������������������������������������������������������������40

Section4

Progress of Medium-Term Management Plan 2025
by Business Segment��������������������������������������������������������������������������������������������22
Progress of Strategy by Business Segment������������������������������������24

Management for
Sustainable Growth

Disclosures Based on TCFD Recommendations�����������������������44
Compliance����������������������������������������������������������������������������������������������������������������������47
Stakeholder Engagement����������������������������������������������������������������������������������47
Dialog with External Directors������������������������������������������������������������������������48
Management Team���������������������������������������������������������������������������������������������������50
Corporate Governance�����������������������������������������������������������������������������������������52
Risk Management������������������������������������������������������������������������������������������������������56

Section

5

6

TOKUYAMA REPORT 2024

Corporate Data

Financial and Non-Financial Highlights��������������������������������������������������� 58
Corporate Data�������������������������������������������������������������������������������������������������������������� 62

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Editorial Policy
The Tokuyama Report is published to communicate theCompany’s management policy and medium- to long-term
strategy to stakeholders in a way that is easily understood.
When preparing this report, we conducted interviews withinvestors and a survey within the Company about the
FY2023 report. The feedback we received is reflected in
our planning. We hope that this report leads to better
communication with our stakeholders as well as a deeper
understanding of the Tokuyama Group.
This report briefly outlines information that is highly
relevant to the value creation story. For more detailed IR and/or CSR information, please visit the Company’s website.

Period Covered
FY2023 (April 1, 2023 to March 31, 2024)
Some activities and information included relates to FY2022 or earlier or isscheduled for FY2024 or later.

Report Scope
Tokuyama Corporation and consolidated subsidiaries (50 companies)• If the reported scope is different for some data in this report, the different scope
will be cited.
• In principle, entities listed as Tokuyama in this report generally refer to Tokuyama
Corporation and the Tokuyama Group.

Reference Guidelines• The Ministry of Economy, Trade and Industry, Guidance forIntegrated Corporate Disclosure and Company-Investor Dialogs
for Collaborative Value Creation 2.0• IFRS Foundation
Integrated Reporting Framework• Global Reporting Initiative (GRI)GRI Sustainability Reporting Standards• Task Force on Climate-related Financial Disclosures (TFCD)
Final Report: Recommendations of the Task Force on Climaterelated Financial Disclosures• The Greenhouse Gas Protocol - A Corporate Accounting andReporting Standard REVISED EDITION

Information Framework

Overview of Strategy

Financial

Non-Financial

Tokuyama Report (Integrated Report)
This report includes corporate activities for a wide range of stakeholders,covering both financial and non-financial aspects of Tokuyama at present andfor the future that we aim to achieve.
https://www.tokuyama.co.jp/eng/ir/report/annual_rep.html

CSR Website
Provides more detailed information on
Tokuyama’s CSR activities

Investors Website
Useful information for shareholders andDetails and Latest Data

investors, organized as an IR Library• Financial documents (financial summaries,
financial briefing materials, etc.)

Tokuyama TCFD Report• Annual securities reports

Outlines initiatives against climate change
based on the TCFD’s four recommendations:
governance, strategy, risk management, andmetrics and targets• Corporate governance reports• Business reports

In addition, in FY2024, we introduced achart generator as a tool to check,

https://www.tokuyama.co.jp/eng/csr/

https://www.tokuyama.co.jp/eng/csr/pdf/2024_tokuyama_tcfd_e.pdf

compare, and analyze performance,

Sustainability Data Book

financial, and ESG-related information,

Mainly includes data for understanding
today’s Tokuyama based on the perspectiveof responsible care (sustainability)

so please do make use of it.

https://www.tokuyama.co.jp/eng/ir/

Cautionary Note on Forward-Looking Statements
This report contains forward-looking statements on the Company’s plans,
strategies, operating performance and other matters. These forward-looking
statements are the Company’s assessments based on information available at thetime of this report’s preparation. Statements in this report are subject to various
risks and uncertainties. Tokuyama's actual activities and performance may differ
significantly from these projections. The Company’s actual activities and/or
operating performance can differ materially from these forward-looking statements
as a result of many factors, including but not limited to changes in economic
conditions, the operating environment, demand trends, and exchange rates.

https://www.tokuyama.co.jp/eng/csr/report/index.html

Disclaimer
This report is for information only and is not intended as a solicitation. The
Company assumes no liability for any losses due to investment decisions madeby relying on forward-looking statements, numerical targets, or other information
contained here.

TOKUYAMA REPORT 2024

7

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 2024

19

Progress of Medium-Term Management Plan 2025

Progress of Medium-Term Management Plan 2025

Transform Business Portfolio

Increase growth businesses’ share of consolidated
net sales to over 50%
FY2021-25 Plans

Priorities and Initiatives• Redefine/reorganize growth businesses around thethree themes of electronics, healthcare, and theenvironment, and proceed to move ahead withexpanding them• Chemicals and cement businesses to promoteincreased efficiency while generating sustainable
cash flows

Technology

Pursue added value and promote technologicaldifferentiation by collaborating more withexternal partners

Efficiency
Gains

Pursue Company-wide operational
efficiency, mainly through DX

International
Expansion

Expand operations in growing
overseas markets

Progress in FY2023

International Expansion

While the sales price revisions that we have been working on
since FY2022 to address soaring raw material and fuel prices
triggered by Russia’s invasion of Ukraine have taken hold andearnings from cement and chemical products recovered in
FY2023, sales of semiconductor-related products were sluggish
due to the slowdown in the semiconductor market, whichbegan in FY2022, making it a year of treading water in thetransformation of our business portfolio in terms of net sales.
Even in this context, Life Science has steadily improved its
performance and the expansion of our semiconductor-related
products has steadily progressed overseas, ensuring stable
execution of measures aimed at achieving the FY2025 plan.

The overseas share of consolidated net sales in FY2023
decreased year on year due to the fall in overseas market
conditions for chemicals and the decline in export volumes
caused by the sluggish semiconductor market. Under suchconditions, Formosa Tokuyama Advanced Chemicals (FTAC), a
manufacturing and sales company for high-purity IPA establishedin Taiwan, has completed its factory startup and started thefull-scale shipment of products. Similarly, STAC, established inSouth Korea, has completed its factory and is working towards
the shipment of products to customers. In addition, we havedecided to establish a manufacturing and sales company forpolycrystalline silicon in Malaysia, and are proceeding withpreparations for future expansion. In the healthcare field, thesales area for dental materials and equipment has traditionallybeen mainly in Europe and the United States, but it has also
expanded to emerging countries, and overseas business growthis accelerating.

Breakdown of Consolidated Net Sales by BusinessElectronic & Advanced Materials

ChemicalsLife Science

CementEco Business

Other

Targetingat least¥400 billion

60%

50% or more

Growthbusinesses’
share ofconsolidated
net sales

Overseas Share of Consolidated Net Sales

35％

20%

26%

50%
or moreFY2020(Results)

FY2021(Results)

FY2022(Results)

FY2023(Results)

FY2024(Forecast)

FY2025(Current
Outlook)

FY2030(Target)FY2020(Results)

FY2023(Results)

FY2030(Target)Efforts in FY2023
Technology

p. 32

Efficiency
Gains• Renewed certification as a “DX certified business operator” by the Ministry of Economy, Trade and Industry• Improved efficiency of the method for considering optimal factory operating policies by building the management simulation
model “T-FORCE” for Tokuyama Factory• Improved operational efficiency through the use of AI

p. 30

International • Establishing an overseas production site of the high-purity IPA through subsidiaries in Taiwan and South Korea
Expansion • Decided to establish a joint venture with OCI Company Ltd. in Malaysia for the semiconductor-grade polycrystalline silicon business* NEDO: New Energy and Industrial Technology Development Organization20

Details Page

• Opened the No. 2 Tsukuba Research Laboratory• Accelerated development through joint research with Taiwan’s Industrial Technology Research Institute (ITRI), universities andnational research institutes, and participation in NEDO* projects

TOKUYAMA REPORT 2024

pp. 17, 31

Tokuyama Value Creation

Value Creation Strategy

Management for Sustainable
GrowthProgress of Growth
Strategy

Corporate Data

Contribute to Mitigating Global Warming

Expedite development/commercialization of next-gen energy technologies
Reduce GHG emissions (Scope 1 and 2) 30% by FY2030** Base year: FY2019 GHG emissions of approximately 7.26 million tonnes-CO2e➡ p. 38 Message from the Executive Officer in Charge of Sustainability➡ p. 44 Disclosures Based on TCFD Recommendations

In FY2023, we set a new Scope 3 emissions reduction target to further promote efforts to achieve carbon neutrality and to take on thechallenge of decarbonizing our supply chain. GHG emissions (Scope 1 and 2) were reduced by 13% compared to FY2019 through biomass
co-fire generation and aggressive energy conservation activities.

Main Reduction Targets1

Initiative Policy

Efforts in FY2023

In-house power
generation facilities

Reduce GHG emissions from in-house power generation
by 50% by FY20302

Co-firing of biomass/ammonia
Use of local energy

CementReduce limestone use and coal use

Suspension of one cement kiln line

Carbon offsets

Consider implementing CCUS technology and offsets

Development of carbon negative concrete

1. R eduction targets: Reviewed by origin.
2. B ase year: FY2019

Practice Socially Responsible Management

Step up high-priority CSR initiatives to lay the groundwork forfurther growth and realize our Vision➡ p. 8 Message from the President➡ p.40 Vision and Materiality➡ p. 56 Risk Management

In order to promote sustainability, which has now become inseparable from management, we have formulated a Corporate Governance Policythat explicitly outlines our philosophy on governance and clarifies the roles and responsibilities of directors. We have developed policies forofficers and employees, including the Tokuyama Group Sustainability Principles and the Tokuyama Group Code of Conduct. In addition, we
have increased management transparency through the disclosure of information in the form of integrated reports, annual securities reports,
and TCFD reports, etc.

Progress toward Achieving Targets
KPI

FY2021Results

FY2022
Results

FY2023Results

FY2025
Targets1, 2

Keys to Achieving Target

Net sales(billion)

293.8

351.7

341.9

400.0

Focus on business portfolio transformation
Reflect cost increases

Operating profit(billion)

24.5

14.3

25.6

45.0

Growth toward FY2025
Revised due to change in depreciation method

Growth business net
sales compound annual
growth rate (CAGR3) (%)

19.9

20.1

8.5

10.0 or higher

Strengthen R&D
Accelerate international expansion

ROE (%)

13.2

4.1

7.4

11.0 or higher

Balance efficiency of shareholders’ equity andfinancial baseRevised due to change in depreciation method

1. Due to the change in 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. In 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).
3. CAGR (compound annual growth rate): The annual geometric mean rate calculated from the growth rate over multiple years

TOKUYAMA REPORT 2024

21

Progress of Medium-Term Management Plan 2025

Quantitative Targets

In FY2023, although we made progress inpassing on the higher raw material and fuelcosts to prices, as can be seen with cement
returning to profitability, growth towardbusiness portfolio transformation came to a
standstill, as sales and profits of Electronic& Advanced Materials declined due to thesluggish semiconductor market.
Meanwhile, in FY2024 we anticipate thatthe semiconductor market will enter a recovery
phase, and we expect increased profits andimproved earnings in all business segments,
based on factors such as the ongoing
improvement in manufacturing costs.

Electronic & Advanced Materials
Net sales(Billions of yen)

19%

100.0

Electronic& Advanced
Materials

74.9
7.2

50.0

91.5

77.9

5.0

0

0

Net sales(Billions of yen)

22%

15.0
10.0

7.0

7.0

FY2022
results

Net sales

FY2023
results

6.0

37.5
7.3

FY2024
forecast

Operating profit

50.0

Life
Science86.5

3.3
FY2021
results

Electronic &Advanced Materials

12%

Operating profit(Billions of yen)

25.0

25.0

Other

Operating profit

20.0

33.5

CementNet sales

150.0

41.4

43.0

8.4

9.0

FY2023
results

FY2024
forecast

FY2025targets

Operating profit(Billions of yen)

12.0

6.0

0

0

FY2021
results

FY2022
results

FY2025targets

その他の地域153億円

Growth businesses

Net sales(Billions of yen)

Consolidated
Net Sales(FY2023)¥341.9 billion

Net sales

Operating profit

Operating profit(Billions of yen)

20.0

5.0

15.0
10.0

10.3

3.0

7.3

5.0

Eco Business

4.0

13.8

0.0

0

(0.4)
FY2021
results

Net sales(Billions of yen)

FY2022
results

Net sales

2.0

6.0

1.0

0.0
(0.1)
FY2023
results0(1.0)

FY2024
forecast

FY2025targets

Operating profit

Operating profit(Billions of yen)

120.0

20.0

150.0
100.0

Chemicals

2%

Life
Science

Chemicals

12%

22

TOKUYAMA REPORT 2024

50.0

101.4

115.5

15.0

14.2

11.5

10.0

13.5

5.0

6.8

0

FY2021
results

Traditional businesses

33%

Eco Business

25.0

116.2

Net sales(Billions of yen)

FY2022
results

Net sales

0

FY2023
results

FY2024
forecast

Operating profit

FY2025targets

Operating profit(Billions of yen)

100.0

50.0

Cement

15.0

50.3

58.5

67.1

6.7

0

(1.9)
FY2021
results(3.7)
FY2022 FY2023
results
results

67.0

10.0
5.0

8.0

0
(5.0)

FY2024
forecast

FY2025targets

Tokuyama Value Creation

Priority Measures• Aggressive expansion into overseas
markets• Expansion of new applications andproduct lineup

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Strategy Progress by Product Area
Product Area

FY2023 Results

Silicon• Decided to establish a joint venture in Malaysia and a subsidiary in
Vietnam for the semiconductor-grade polycrystalline silicon business• Increased capacity of semiconductor-grade high-purity chlorosilane•E stablishment of second location for semiconductor-grade
polycrystalline silicon•G lobal expansion of high-purity chlorosilane at two locations inJapan and China

IC chemicals• Expansion of supply of high-purity IPA for electronics manufacturing
by the Taiwan JV•D evelopment of a system for supply of high-purity IPA for theelectronics manufacturing by the South Korea JV•S tart of supply of high-purity IPA for the electronics manufacturing
by the South Korea JV•E xpansion of global bases• Increased production capacity of hydrophobic silica•E xpansion of case and personal care applications
• E
 xpansion of sales of hydrophobic silica•E ntry into the field of organic silicone•E xpanded lineup of aluminum nitride/boron nitride fillers•L aunch of silicon nitride•E xpansion of sales of boron nitride fillers•A pplication development and expansion into downstream fields• Pursuing high-grade production andanalysis technologies
SilicaThermalmanagement
materials

Future Plans and Investments• Strengthen sales structure andaccelerate increase in production
capacity to further increase share of theoverseas dental materials andequipment market

Product Area

FY2023 ResultsFinechemicals•S ales performed well due to recognition of the quality ofgeneric APIs•S
 teady increase in global market share due to high photochromic
performance for eyeglass lenses•D evelopment of rare APIs and strengthened competitiveness•M ake further performance improvement and obtain overseas
market share through the introduction of next-generation
photochromic materials• Strengthen new product development
and sales activities to further expand thephotochromic market overseas

Dentalmaterials andequipment•T okuyama Dental built new production building•G lobally expanded composite resins due to increased shipments
to overseas markets, and increased sales to Europe, the UnitedStates, and emerging markets•C ontinued increase in sales of blocks for dental crowns•S trengthen sales structure and accelerate supply systems tofurther increase market share•A ccelerate material development to expand the digital dental field

MedicalDiagnosis
Systems• Increased sales of laboratory information systems and laboratory
automation systems in the domestic market, and had strong salesof electrolyte analyzers in the Chinese market• In conjunction with the expansion of the electrolyte business, start
construction of a production building to meet the increasing
demand for electrodes

Product Area

FY2023 Results

Future Plans and Investments

Environment•W aste gypsum board recycling: Started operations at the third
domestic site in Muroran City, Hokkaido• PV1 panel recycling: AGC succeeded in testing the production of
float glass using our recycled cover glass as a raw material•W aste gypsum board recycling: Secure stable operations andrevenue at three domestic plants•P V panel recycling: Further improve recycling quality and build abusiness model

Ion-Exchange
Membranes• Improved productivity in response to replacement demand forexisting customers• Cultivate environmental-related demand such as for organics
recovery and decarbonization• Strengthen the medical diagnostic
system business• Respond to expanded demand forwater treatment membranes due tostrengthened environmental regulations• Expansion of recycling business for
waste gypsum boards and PV
panels, etc.
• Commercialization of next-generationenergy technologies that have beendeveloped

Future Plans and Investments

1. PV: photovoltaic panels for converting sunlight into electricity• Strengthen business and increase
efficiency to maximize revenue• Reduce CO2 emissions and waste byimproving manufacturing processes

Product Area

FY2023 Results

Soda Ash andCalcium
Chloride•L aunched a business model transformation project for the soda
ash business•M aintenance and renewal of equipment necessary for stablebusiness continuity•E nergy saving and rationalization in response to environmental
issues• Improve the supply chain through thepromotion of DX
Chlor-alkali
and vinyl
chloride

Product Area

• Introduction of energy-saving facilities toreduce CO2 emissions•R eduction of coal consumption byincreasing the acceptance of a thermalenergy alternative such as waste plastic

Future Plans and Investments•A cquired Shin Dai-Ichi Vinyl and developed manufacturing
technology package for general purpose PVC resin

FY2023 Results

Cement• Revised sales prices• Improved energy efficiency through the introduction ofhigh efficiency coolers• Considered the suspension of one kiln line

Recycling• Enhanced collection of waste plastic•P repared for the receipt of liquid fuel from waste and byproducts

Future Plans and Investments• Suspension of one kiln line and the establishment of an optimal
production system• Maintenance and renewal of the equipment required for stablebusiness continuity• R&D and introduction of technology aimed at environmental
issues and carbon neutrality• Expansion of waste treatment that contributes to a closedloop society

TOKUYAMA REPORT 202423

Progress of Strategy by Business Segment

Electronic & Advanced Materials
Business
Goal

S

Strengths

Growth businesses

Push forward with globalization, and capture the top market share in
the high-purity and thermal management materials fields supporting
the miniaturization and stacking of semiconductors• Superior quality in semiconductor-related products• Differentiation through such proprietary technologies as reductive
nitridation method (thermal management materials) and direct
hydration (IPA)• Lack of marketing strengths for global expansion• High market share in aluminum nitride powder in thermal management
materials

W
Weaknesses

SWOT Analysis

O• Promotion of 5G and IoT, increased demand for data centers• Growth in semiconductors due to increased functionality ofelectronic devices, larger memory capacity, and electrificationof vehicles• Entry of overseas manufacturers• Technological innovation in semiconductor market

level of quality requirements from users associated with
Opportunities • IncreasedT
Threats

advancements in miniaturization and stacking

Message from the Executive Officer in Charge

Katsumi Nagase

Improve our market presence throughtechnological innovation and increase
capacity to lead to the establishment of atimely supply system
FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationTA

he Advanced Materials Business Division consists of two segments:
Silica and Thermal Management Materials. Shipments of silica forsemiconductor chemical mechanical polishing (CMP) were sluggish due tothe downturn in semiconductor market conditions, whilst shipments forsilicone and other products were on a recovery trend from around the endof the fiscal year. However, shipments of silica decreased mainly due to theeffects of the stagnation in the Chinese economy.
In order to expand the new applications set forth in Medium-Term
Management Plan 2025, Tokuyama Chemicals (Zhejiang) Co., Ltd. hascompleted expansion of surface-treated silica production capacity to meet
the wind power blade adhesives and paint ink markets, which are expected
to grow in the future. We will be proceeding with customer evaluations after
the trial operation of the expanded line. New grades for food products havealso begun to be evaluated by leading North American companies, and wehave started to expand sales of spherical silica as an alternative material for
microplastic beads in the United States and Europe. Shipments of thermal
management materials were sluggish due to the decrease in actual demand
for aluminum nitride powder for semiconductor materials and excessive
customer inventories. However, we have been working to expand sales ofaluminum nitride and boron nitride fillers by providing differentiated quality.
We recognize that the future challenge for thermal management materials
will not only be to improve our presence but also to establish a timely supply
system in response to the speed of growth and technological innovation in
the semiconductor and mobility industries.

24

Managing Executive Officer
General Manager, Electronic &Advanced Materials Business
Headquarter, Advanced Materials
Business Division, and New
Business Division

TOKUYAMA REPORT 2024

t the Center for Commercialization of Advanced Technology,
we are working to commercialize silicon nitride, which is
expected to be an insulating substrate for power semiconductors
in vehicles and other applications. We are brushing up quality levels
to satisfy our customers and are developing mass-production
technologies to stabilize quality and to ensure more stableproduction. Aluminum nitride and boron nitride fillers also haveexcellent fluidity in resin, which increases the filling amount andsignificantly increases the thermal conductivity of the resin whenfilling the resin, and we have received a high level of support from
customers. By offering these products in the lineup, we will be able
to provide a range of green energy sources, such as automotive,
industrial machinery, railways, solar cells, and wind power. We will
enhance our presence in thermal management materials for power
semiconductors used in a wide range of fields such as powertransmission, as well as in advanced semiconductor packages that
support HPC (High Performance Computing) and AI. As electronic
devices used in these fields become more compact and dense, theamount of heat generated by the devices continues to increase,and heat dissipation measures are becoming an urgent issue. As
new social infrastructure is being built while advances are being
made with electronic equipment, we will contribute to the developmentof the semiconductor and information communications industry by
expanding our lineup of highly efficient thermal management
materials to meet customer needs.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Message from the Executive Officer in Charge

Seiji Teranishi

Honing our technology and adding value
to remain the company of choice among
semiconductor industry leaders

Executive Officer
General Manager, Electronic
Materials Business

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationTS

he Electronic Materials Business Division includes two
subsegments: Silicon and IC Chemicals. With regard to silicon,sales of polycrystalline silicon, a major product, were sluggish dueto the strong inventory adjustments caused by the slow
semiconductor market, but we have launched a new etching line torespond to the higher quality required by our customers. Customer
feedback has also been good, and we will continue to improve
quality to ensure that our products can be used in the latest siliconwafers with peace of mind.
For IC Chemicals, on the other hand, there has been major
growth in demand for high-purity IPA used in cleaning processes
due to increased miniaturization of semiconductor chips in recent
years. In Taiwan, which is the largest demand area, we haveestablished an integrated production plant for raw materials, andhave received certification from our largest customer on all
production lines. In the past, we exported high-purity IPA fromJapan, but we are currently switching to mostly locally produced
products for our largest customer.
Both polycrystalline silicon and high-purity IPA are used instate-of-the-art semiconductor plants, so high purity must be
maintained in every process until used by the customer. A futureissue will be to ensure that we generate revenue as a growthbusiness by making sure that customers recognize the value.

TOPICS

ince the second half of 2022, the semiconductor market has
been in the longest stage of inventory adjustment in its history,
but looking from a medium- to long-term perspective, thesemiconductor market will definitely continue to grow. Despitesome planned delays, new factories are under construction in allareas, including silicon wafers, memory and foundries, and we havealso been working to support our customers’ growth strategies byproceeding with new plans for polycrystalline silicon and high-purity
IPA. In particular, a new plant was constructed in South Korea forhigh-purity IPA, as in Taiwan, and samples began to be supplied tomajor customers this year. As we are making a somewhat late entry
into the Korean market, we will carefully study the stable production
technology, quality control technology and trace analysis technology
cultivated in Japan, Taiwan and Singapore, and take action to
enable mass production as soon as possible. In addition, ourhigh-purity IPA will be mass-produced at our Taiwan plant to be
used at a 2-nm plant for the first time in the world. Although thequality requirements of our customers are extremely demanding,we will work with them to pursue quality, create added value,
differentiate ourselves from price competition, and continue tosurvive in this growing market.

Semiconductor Market Conditions

The semiconductor industry, which had been ina prolonged slump, is expected to see a recovery
and further expansion in demand, especially formemory and logic products, against the
backdrop of investments related to AI and otherareas from FY2024. In our Electronic & Advanced
Materials business, we expect products used in
the front-end processes of semiconductor
manufacturing to recover first, followed by arecovery in upstream components and products
used in back-end processes. Although the timingof recovery will depend on inventory conditionsin the supply chain, we will secure an appropriate
supply system to reliably meet demand.

Semiconductor Manufacturing Process and Market Recovery by Product
Polycrystalline Siliconsiliconwafers

Deposition Lithography

Wafer fabrication
process

Polycrystalline silicon

Etching

CMP

Washing

Front-end process

Thermal management
materials

SilicaPackaging Semiconductors

Back-end process

High-purity IPA

Market recovery (image)
Late
Polycrystalline silicon

Chips

Thermal management
materials

Early
Thermal management
materials

SilicaHigh-purity IPA

TOKUYAMA REPORT 202425

Progress of Strategy by Business Segment

Life Science
Business
Goal

S

Strengths

Growth businesses

Use unique technology to capture top niche market share in areas
where differentiation is possible: vision, dental, and diagnostics• Highly unique product and technology development capabilities
based on chemical technology• Lack of marketing strengths and weak sales system inoverseas markets• Close collaboration between sales, manufacturing anddevelopment to enable a rapid and detailed response touser requests

W
Weaknesses

SWOT Analysis

O

Opportunities• Rise of emerging manufacturers centered on South Korea
and China• Growth of healthcare due to advent of super aging society
and heightened health awareness• Destabilization of supply chain such as in procuring raw materials,
outsourcing production overseas, and exporting products due toglobal instability• Expansion of emerging markets in the Middle East, Asia, andSouth America

T
Threats

Message from the Executive Officer in Charge

Strengthening production capacity in response toincreased demand.
Increasing the speed of new product development
will lead to increased revenue

Director, Senior Managing
Executive Officer,
General Manager, Research &Development Division andLife Science Business Division

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationII

n FY2023, the Life Science Business Division recorded anincrease in revenues and profits over the previous fiscal year.
In the dental materials and equipment business, overseas salesof composite resin, including OMNICHROMA®, performed well, andthe impact of the weaker yen also resulted in increased revenues
and profits. In APIs and intermediates of the fine chemicals
subsegment, APIs for generic drugs were strong, and thephotochromic materials for eyeglass lenses in the same
subsegment also performed well, resulting in increased revenues
over the previous fiscal year. In addition, the development of
next-generation products is progressing steadily toward the launchof new products in FY2025.
For medical diagnosis systems, sales of laboratory Information
systems and laboratory automation systems increased in theJapanese market, and sales of electrolyte analyzers were strong in
the Chinese market, resulting in increased revenues and profits.

26

Fumiaki Iwasaki

TOKUYAMA REPORT 2024

n a year where the semiconductor recession continued longer
than expected, we felt the expectation for a Life Sciencebusiness that is not susceptible to economic trends. In order toexpand the Life Science business, we will continue to improve
production efficiency through the promotion of DX at the Kashima
Factory, strengthen overseas networks, and introduce new products
and services into the market.
In the dental materials and equipment business, the constructionof the production building, which was started in FY2023, wascompleted in April 2024. Going forward, we will increase production
capacity and meet customer demand by increasing production
facilities and improving efficiency. In the area of APIs andintermediates, we will continue to embrace challenges in new areas
such as the development of processes for highly active APIs while
maintaining the current business scale. In photochromic materials
for eyeglass lenses, we will continue to focus on sales activities that
respond to customer needs and market changes, and will speed up
the development of new products for FY2025. In the diagnosis
systems business, A&T Corporation has begun construction of a
new building at the Shonan Site to meet the increasing demand forelectrodes, which are consumables for electrolyte analyzers. With
operation planned to start in May 2025, A&T will supply highperformance, high-quality electrodes to medical facilities around theworld. The company will also work with Tokuyama to develop
medical diagnostic reagents.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Progress of Strategy by Business Segment

Eco BusinessBusiness
Goal

S

Strengths

Growth businesses

Serve as a new business pillar for the future• Unique technologies such as continuous large recrystallization
technology for gypsumW• Weak synergies among businesses• Ion-exchange membrane water treatment• Decreased competitiveness due to rising energy costs• Unique technologies, such as PV panel recycling using thermal
decomposition treatments

Weaknesses

SWOT Analysis

O• Increased wastewater treatment demand due to tougher
environmental regulations in China and emerging countries• Rise of emerging manufacturers centered in China• Growing global environmental consciousness• Rampant competition as end-of-life PV panels become asocial issue

Opportunities • Global awareness for creating a recycling-oriented societyTThreats

Message from the Executive Officer in Charge

Promote sales expansion and the commercializationof distinctive products and technologies against
a backdrop of growth potential in environmentrelated markets
FY2023 Summary (Results and Issues)B

oth revenue and profit in the Eco Business decreased over theprevious fiscal year in FY2023, but this was due to a special
factor of Excel Shanon Corporation, a plastic window sash
manufacturer, being excluded from our consolidated subsidiaries asa result of an increase in the investment ratio of our partner(Panasonic Corporation). Across the division as a whole, we havedeveloped PV panel recycling technology in Nanporo, Sorachi-gun,
Hokkaido, and started operation of the third plant of Tokuyama
Chiyoda Gypsum Co., Ltd., which has waste gypsum board
recycling technology, in Muroran City, Hokkaido, to provide a solid
foundation for future growth.
In the development of PV panel recycling technology, ourcontinuous operation verification testing to process and extract thematerials that make up obsolete PV panels at a high level of quality
was successful. In addition, the cover glass, which is approximately
60% of the total weight, is separated and processed to be supplied
as a recycled material for float glass, and AGC Inc. was successful
in conducting the first recycling test with the material in float glass inJapan. We will continue our joint research with NEDO in FY2024,
and will promote the recycling of other materials, including silicon,
which is our strength, and build a business model for realizing acircular economy for solar panels.
Tokuyama Chiyoda Gypsum Co., Ltd., which possesses
technology that enables the complete recycling of waste gypsum
board into gypsum board raw materials, has launched operations at
its third plant in Muroran City, Hokkaido, a region where therecovery of gypsum board had been undeveloped. In FY2024, thesecond year, we aim to make the Muroran Plant profitable. While
this company is facing a harsh business climate, we will secure

Naoki Tamura
Executive Officer
General Manager,
Eco Business Division

earnings and stable operations at our three locations as we goahead with several initiatives, including revising our prices.
ASTOM Corporation achieved major improvements in bothrevenue and profit with continued demand from the use of
specialized membranes with distinctive characteristics to recover a
valuable resource, lithium (Li). There was also firm demand forion-exchange membranes used in the production of salt, foods,
and potable water. In addition to the extremely strong demand fromboth Japan and overseas, the demand for technologicalimprovements is likely to remain strong. We will further promote
development, and will establish and strengthen our supply system
in order to respond to robust demand as much as possible.

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business Implementation

Although certain progress has been observed in terms oftechnology development, it will take time for this to lead to sales
and profits, and in terms of business, we have not yet met our
expectations as a division that plays a part in the areas of electronics,
healthcare and the environment that we have positioned as growthbusinesses. We are also showcasing technologies that contribute to
the environment at exhibitions, and have received strong interest
from both Japan and overseas, so we feel the potential for thegrowth of the market as well as the high expectations of ourcustomers for our technologies. We will strive to further improve ourbusiness value by contributing to the formation of a sustainable
society with a high awareness of the commercialization of technologythat contributes to the environment.
TOKUYAMA REPORT 2024

27

Progress of Strategy by Business Segment

Chemicals
Business
Goal

S

Strengths

Traditional businesses

Ensure stable earnings in the existing business• Weak sales network overseas• Only domestic manufacturer of soda ash• Sales volume of calcium chloride for antifreeze fluctuates
depending on weather conditions• Electrolyzer, electrolysis and manufacturing technology with extensive
operating record• Coal-based in-house power generationW

Weaknesses

SWOT Analysis

O• Decreasing domestic demand due to customers relocating overseas, etc.
• Easing supply and demand balance due to higher production atcompetitors using expanded electrolysis and vinyl chloride
production plants• Spread of fuel cell vehicles and promotion of hydrogen society• Increase in demand for caustic soda and PVC resin due toeconomic growth in Southeast Asia and India• High raw material prices associated with the Russian invasion of
Ukraine and unrest in the Middle East

Opportunities

T
Threats

Message from the Executive Officer in Charge

Aiming to maximize profits by strengthening sales
capabilities through a new sales structureManaging Executive Officer
General Manager, Chemicals
Business Division

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business Implementation

ISn order to achieve Medium-Term Management Plan 2025, wehave worked to strengthen the chloro-alkali and PVC chloride
chain with the aim of maximizing income in the electrolysis
business. In FY2022, Shin Dai-Ichi Vinyl Corporation became awholly owned subsidiary, and in order to further integrate the PVC
business, we established a system for absorption into Tokuyama
Corporation, which was realized in April 2024. This will allow us tomaximize profits by making more flexible decisions about how
chlorine generated from electrolysis process is distributed bylooking at the market conditions for PVC resin. In addition, we
intend to continue the PVC business into the future by creating
technology packages based on our expertise in the production of
PVC resin. In FY2023, the technology packaging of generalpurpose PVC resin was almost finished, and we will proceed withthe technology packaging of paste PVC resin in the future.
The Company was founded to provide soda ash in 1918 and iscurrently the only manufacturer in Japan. In order to maintain stablesupply and production for the next 100 years, we launched a
project in FY2023 to carry out fundamental modifications to the
manufacturing process. In FY2024, we will proceed withpreparations to implement more specific measures, as the
improvement of this process is expected to have a significant effecton energy savings. In the sodium silicate and cullet business, likesoda ash, as one of the largest manufacturers in Japan, we will
carry out various studies including fuel conversion to improve andstabilize quality in order to continue to provide stable supply andproduction.

28

Hirotaka Nishihara

TOKUYAMA REPORT 2024

ince FY2024, we have significantly changed our chemical salesorganization to become a more customer-orientedorganization. Except pharmaceutical-grade baking soda andhydrogen, which were previously excluded from soda and calcium
chloride, sales of all products, including chloro-alkali products suchas caustic soda and PO, have been transferred to Tokuyama Soda
Trading Co., Ltd. (TST), a wholly owned subsidiary of Tokuyama. In
addition, sales of Sun Arrow Kasei Co., Ltd., a PVC compound
manufacturer, and sales of METACLENE, a chlorine-based solvent,
have also been incorporated into TST’s Chemical Sales Division,
aiming for more functional sales. Also, the sales of the merged Shin
Dai-Ichi Vinyl Corporation will be reorganized as the PVC Sales
Department of the Company, and the Chemical Sales Control
Division will be established as its upper level organization. The
decision-making for chemicals sales as a whole, including TST, will
be swiftly conducted at the Management Office, with the aim of
maximizing profits in terms of sales toward achieving the MediumTerm Management Plan 2025.
Furthermore, as an environmentally friendly product, we havealso started the pilot production of magnesium hydride using ourhydrogen. Looking ahead, we will work with our technology partner
Biocoke Lab. Co., Ltd. to develop applications with the aim ofbringing them to market early.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Progress of Strategy by Business Segment

CementBusiness
Goal

S

Strengths

Traditional businesses

Become the domestic industry leader in energy efficiency• Contribute to environmental preservation by accepting waste frominside and outside the Company for cement feedstock and as athermal energy alternativeW• Increase in repair costs due to aging of facilities• Technological development capabilities from a chemical standpoint
based on chemical manufacturing

Weaknesses

SWOT Analysis

O• Domestic demand due to national resilience, urban
redevelopment, Osaka/Kansai Expo and an IR,* etc.
• Demand for building infrastructure associated with economic
development in emerging countries

Opportunities * IR: integrated resort• Decrease in domestic cement demand due to decline in population• Cost increases due to rising prices and labor shortages• Criticism of cement industry due to issues with CO2 emissions

T
Threats

Message from the Executive Officer in Charge

Takahide Taniguchi

Become the domestic industry leader in energy
efficiency in the two-kiln production system

Managing Executive Officer
General Manager,
Cement Business Division

FY2023 Summary (Results and Issues)

Progress on Medium-Term Management Plan 2025
Priority Measures and Future Business ImplementationDA

ue to a significant increase in coal prices since 2021, we haverevised our sales prices on two occasions. However, we havenot been able to absorb the significant cost increases and haveexperienced operating losses in the last two fiscal years. In addition
to self-help efforts such as thermal energy cost reduction andconstraining repair costs, we have continued to vigorously revise
sales prices in order to secure profits, and this fiscal year we havebeen successful in achieving an operating profit.
However, prices for raw materials and supplies and logistics
costs continue to rise. We are also increasingly required to respondto environmental issues, and to make efforts toward carbon
neutrality. Under such circumstances, in FY2023 we installed
the latest high-efficiency coolers and switched to bag filters forelectrostatic precipitators in our manufacturing facilities. We are also
expanding the process of replacing thermal energy, and we havebegun to prepare for the acceptance of liquid fuels from waste andby-products, as well as for the acceptance of plastic fluff1 fromoverseas. In addition, we are conducting joint research on CO2fixing recycle beads to effectively utilize biomass combustion ash
and realize CCS.2 We have conducted test operations at our
Tokuyama Factory.

s priority measures for our business target of being thedomestic industry leader in energy efficiency, we will focus on
introducing equipment that is energy efficient and that reduces CO2
emissions as we cut coal consumption by using more thermalenergy alternatives, such as waste plastic. The Company has
introduced the latest high-efficiency coolers to reduce CO2
emissions, and has increased the purchase of plastic fluff to reducecoal consumption. In addition, we have also started to accept new
liquid fuels from waste and by-products in an effort to diversify andstabilize thermal energy alternatives.
On the other hand, domestic demand for cement has
decreased more than had been expected at the time of theformulation of Medium-Term Management Plan 2025 due to longer
construction periods and the shortage of personnel at contractors
and logistics companies, etc. In this situation, we have been
considering the establishment of an appropriate cement production
system in order to strengthen the profitability of our cementbusiness, and have decided that it would be best to suspend one kilnline and use a two-kiln production system. In the future, we willdevelop our business with the aim of becoming the leader in energy
efficiency in Japan in the two-kiln production system.

1. Fluff: Film or sheet cut finely to about 30 mm.
2. CCS: Carbon dioxide Capture and Storage

TOKUYAMA REPORT 202429

Growth Drivers

DX Strategy
Overview of DX Strategy
Previous Plan

Medium-Term Management Plan 2025

Next Plan(FY2021-FY2025)(FY2026-)(until FY2020)

FY2021

Formulation of
Execution Plan

Progress

Formulation of Basic Policy

FY2020

Number of TDX Participants

In Medium-Term Management Plan 2025, Tokuyama hasstated that it will transform its business portfolio to the growthareas of electronics, healthcare, and the environment, and isactively promoting DX to achieve this goal. Tokuyama DX (TDX)
is not simply the use of digital technology to improve
operational efficiency, but rather structural and operational
reforms to realize Tokuyama’s Vision through the utilization ofdata and digital technology.
The TDX Basic Policy is “building a foundation” and“promoting transformation” in parallel. While aiming for“transformation” such as the advancement of supply chain
management and development of new materials by applying
Materials Informatics (MI), we are also focusing on “building afoundation,” such as the development of a paperless anddigital environment in order to overcome changes in the world
environment and ensure transformation.
Another thing that we emphasize in promoting TDX is thatthe entire Tokuyama Group must be involved. In order to createa highly engaged organization that can adapt to environmental
changes, each employee must think DX as a personal matter.
To accomplish this, DX key persons are assigned to eachdepartment and company to raise the overall level of TDX
activities while building a cross-company network.

Nov. 2020

FY2022

peopleFY2025 ・・・・・ FY2030

FY2024

Promotion of TDX Activities(Implementing 25 measuresin sequence)
Launch Executionof various
andactivities promotion

Apr. 2022
TDX
assignment

2

FY2023150 people(13 measures)

Apr. 2023

Effect realizationand progress oftransformation

Enhancing
initiatives

Apr. 2024

TDX
assignment

270 people(18 measures)

Further expansion
through horizontal
deployment of
measures, etc.

TDX
assignment

400 people(25 measures)

Establishmentof DX Promotion
Preparation Div.

Progress with Major KPIs

30

TOKUYAMA REPORT 2024

Increase speed

Progress

1. Complete installation of SCM system in
Kashima area

●

●

●

2. Complete construction of a digital twinmodel for Tokuyama Factory

●

●

●

3. Complete DX literacy training for all
employees●●●

4. Complete building a foundation for
the utilization of human resources
information

●

●

●

5. Generate over 300,000 hours for theentire Group

●

●

●

6. Realize a factory with double
productivity (Dental)●

7. Reduce paper documents by 50% andstreamline operations●●

8. Train more than 100 DX workplaceleaders●●

9. Share information on 100 DX initiatives
within the Group●10. Expand MI material development by
more than 10 times●●

11. Register 20,000 new members throughnew marketing

●

●

●

12. Reduce budgeting time in Tokuyama
Factory by 80%.

●

●

●

13. Reduce time required for production
planning by 50%

●

●

●

14. Reduce ESG data aggregation time by
90%.

●

●

15. Increase in DX promotion index to 3.5
points (initially 0.8)

●

●

2

Apr. 2023

1

Apr. 2022

0

3

●

4

5

Apr. 2024

15 Main Quantitative Targets

●
●
●
●

●
●

●

Note: Evaluation criteria of 5 levels are set by each project and confirmed and assessed by thesupervising PMO. The fifteen items are also disclosed outside the Company.

6

FY2025-end target

Enhance functionality

Improve productivity

Building a foundation

Category

Total

With TDX, we have established eight categories, including
manufacturing, workstyle, R&D, and business transformation,
and are implementing a total of 25 measures. For these
initiatives, we have set 15 quantitative targets and areworking to achieve them. Our measures are making steadyprogress overall, and we are “building a foundation” fortransformation. As one of the results, in manufacturing DX,
we have built the Tokuyama Factory Optimizer with Rapid
Calculation of Economic efficiency (T-FORCE) from theperspective of the overall optimization of the Tokuyama
Factory. The model is expected to significantly improve theefficiency of the process of considering optimal factory
operation policies, taking into account the balance between
energy, materials, and waste circulation, and to serve as abasis for developing guidelines for GHG reduction and for thetransformation of the business portfolio.
While Company-wide, cross-sectional measures areunderway to “improve productivity,” “enhance functionality,”and “increase speed,” our future challenge is to improve
individual skills and expand voluntary DX efforts at the frontline. While promoting skills development through DX training,which is currently being implemented as a Company-widemeasure, we will also work together to achieve our targets for
FY2025 by raising the level of autonomous activities at theworkplace level through the use of generative AI, citizen
development, and other measures.
In January 2024, our TDX initiatives were well received,with the renewal of our “DX certified business operator”
certification from the Ministry of Economy, Trade and Industry.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Promoting Operational Efficiency Improvement through the Use of AI

Prediction of results by AI

In TDX, we are actively promoting the use of AI in various
business areas, including production activities. The introductionof the system into monitoring and quality control operations,which place a particularly heavy burden on workers, has beenremarkably effective. We would like to show you some examples.
In terms of monitoring operations, we developed andintroduced an application for detecting black smoke, using
environmental monitoring cameras at Tokuyama Factory. In thepast, our response was to have disaster prevention cameras
monitored by people, but the development and introduction of adiagnostic imaging AI with high judgment accuracy has enabledconstant monitoring, contributing to the early detection of blacksmoke and reducing the burden on monitoring staff.
In terms of quality control, AI can now predict the results ofmortar compressive strength tests carried out in the Cement
Production Department. For strength that develops over a long
period of time, as many as 28 days are required for the test
results to be revealed, but by using AI to predict long-term
strength, this can be reflected in adjustments to manufacturingconditions at an earlier stage, contributing to the further stabilizationof quality.
In the area of medical diagnostic systems, we have developed
an in-house AI-based automatic judgment system for quality
inspections, which has dramatically improved inspection quality
and productivity. Compared to conventional inspection systems,
the number of visual image inspections has been reduced by
75%, and the training time for inspectors has also been reduced.
Furthermore, roll-out to other products was also achieved withina short period of four months after introduction.
In order to strengthen and expand the use of AI, we aresystematically implementing “promoting utilization,” “sharing
information,” and “human resource development” throughout the
Tokuyama Group. The first meeting of the Tokuyama Group AI
Promotion Council was held in July 2024 for the purpose of“information sharing” and was attended by DX practitioners fromeach Group company. We aim to expand the use of AI technology,
which tends to be department-specific, to the entire Group, andto take it to new heights through mutual cooperation.

AI
Chemical analysis
Mineral composition
Operating conditions
・・・

Various data

Product strength
prediction

Strength prediction in a short period

TOPICS

Accelerate International Expansion
Decided to establish a joint venture with OCI of South Korea in Malaysia for the semiconductor-grade
polycrystalline silicon businessAt the meeting of the Board of Directors held on December 13,
2023, the Company resolved to enter into a joint venture agreementwith OCI Company Ltd. (Seoul, South Korea) concerning the joint
production of semi-finished polycrystalline silicon for semiconductor
applications in Malaysia and to establish a joint venture company.
In anticipation of increased demand associated with the future
expansion of the semiconductor market, we will promote businessexpansion in electronics while limiting increases in GHG emissions
in order to establish a production and supply system for polycrystalline
silicon for semiconductors that uses clean energy. The establishmentof the company is subject to approval from the relevant authorities.

Overview of the Joint Venture (Equity Method Affiliate)
Name

Sarawak Advanced Materials Sdn. Bhd.

Location

Sarawak, Malaysia

Business

The manufacture and sale of semi-finished semiconductorgrade polycrystalline silicon

Capital

US$168 million

Production
capacity

8,000 tonnes * Plans to increase annual production toapproximately 10,000 tonnes in the future

Investment
amount

US$300 million

Investment ratio

OCI Company Ltd. 50％
Tokuyama Corporation 50%

TOKUYAMA REPORT 202431

Growth Drivers

Research and Development“One Tokuyama” to ensure the transformationof the business portfolio
Director, Senior Managing Executive Officer,
General Manager, Research & Development Division andLife Science Business Division

Fumiaki Iwasaki

Medium-Term Management Plan 2025 is now in its fourth year.
As stated in our Vision, we have made continuous efforts torefine and leverage our unique strengths and to take onchallenges in new areas, but we recognize that we have now
entered a period in which we must reap the fruits of our efforts.
In FY2023, we took stock of our R&D themes, taking into
account changes in the market environment and Tokuyama’s
strengths, and reassigned our personnel. In addition, in January2024 we opened the No. 2 Tsukuba Research Laboratory andtransferred 50 researchers in the healthcare domain andenvironment domain from Tsukuba Research Laboratory, which
had become too small, to improve the environment for researchand development activities. Based on the above, we would
like to raise the stage of research and development for two
development themes going into the final year, FY2025, leading
to monetization in the future.
One of these is membranes for AEM water electrolysis in theenvironmental domain, and roll-to-roll equipment has been installedat the No. 2 Tsukuba Research Laboratory, providing a system toenable the shipment of samples. Water electrolysis using anion
conductive membrane is a technology that is anticipated to reducethe cost of hydrogen production because it is expected to reducematerial costs due to the non-use of rare precious metals as
catalysts. In recent years, active research and development has
been conducted both in Japan and abroad, and Tokuyama will
also contribute to activities aimed at social implementation.

TOPICS

The other is porous silica, which is being developed by
Tokuyama Research Laboratory in collaboration with theElectronic & Advanced Materials Business Headquarter, and isbeing considered for use in the electronics field due to its
uniqueness of being a powder control technology that enables
the flexible control of particle hardness. We plan to scale up fromthe lab level in order to meet demand.
In FY2024, in addition to the aforementioned monetization
efforts, we will select themes for the next Medium-Term
Management Plan based on marketing information obtained
from the front lines. In addition to strengthening the electronics
domain, we would like to focus on expanding the healthcare
domain, which is less susceptible to changes in the economic
situation. In the medical diagnostics systems field, we aredeveloping new diagnostic reagents by utilizing our chemical
expertise, and A&T Corporation and Tokuyama will work as one
to bring them to market.
The realization of commercialization from R&D requires a
One Tokuyama response with seamless connections between
the Research & Development Division, the business divisions
and operating companies responsible for future exit, as well as
the engineering personnel responsible for process development.
Everyone involved will work diligently in order to ensure thetransformation of our business portfolio.

Strengthening Research in Healthcare and the Environment, Opening No. 2 Tsukuba Research Laboratory

No. 2 Tsukuba Research Laboratory was opened in January 2024. No. 2
Tsukuba Research Laboratory, located about a 10 minutes away from theexisting Tsukuba Research Laboratory, covers an area of approximately
45,000 m2 and can house up to 100 employees. As part of the organizationof the Tsukuba Research Laboratory, which is responsible for corporate
research, this facility conducts technological and product development in thehealthcare domain, mainly medical materials and diagnostic reagents, and in
the environment domain, including ion exchange membranes for AEM waterelectrolysis for the production of hydrogen. With regard to the developmentof medical diagnostic reagents, we are developing POCT (Point of Care
Testing), a reagent for immediate testing at clinical sites that can be used insituations such as home care, and we will actively promote R&D activities
with an eye toward the next Medium-Term Management Plan.

32

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Value Creation Strategy

Management for Sustainable
GrowthProgress of Growth
Strategy

Corporate Data

R&D Structure Based on Future Predictions forTarget Markets
Much of Tokuyama’s research and development begins with asearch on the theme of technologies needed in the market basedon predictions of future social issues, targeting markets which are
centered on the growth business areas of electronics, healthcare,and the environment. Then, from among a countless number ofthemes, we select themes in which the Tokuyama Group candemonstrate its strengths by combining marketing information
obtained from existing customers and potential markets with theTokuyama Group’s proprietary technologies and knowledge thatcan be utilized from outside the Company.
New themes are brought to market step-by-step throughbasic research, technology development, and productdevelopment within the corporate R&D of the Research &Development Division, while utilizing open innovation in order tospeed up development and receiving support from various
specialist departments within the Company. In particular, thesupport provided by the Analytical Science Department (Shunan
City, Yamaguchi Prefecture), which possesses high-precision
analysis technology, plays an important role in differentiating us
from our competitors in electronics. Furthermore, as part of the
TDX1 initiative, we are also actively utilizing generative AI and MI2
in our R&D activities in order to transform and streamline ourdevelopment operations.
Meanwhile, it is also true that there is a major barrier,known as the “valley of death,” between the R&D phase andcommercialization. In April 2022, we established the New
Business Center (upgraded to a division in April 2023, now the

New Business Division) for the purpose of launching new
businesses in growth business areas with a sense of speed. At
present, we are concentrating various management resources on
the construction of hardware at the Center for Commercializationof Advanced Technology (Yanai City, Yamaguchi Prefecture) inorder to commercialize alkaline water electrolysis technology forthe production of hydrogen and heat dissipation applications thatwill contribute to the improved performance of electronic devices.
The development groups in each business division are
positioned on the front lines of marketing to ascertain market
needs and the latest technological trends, including requests for
improvements from existing customers. The organization can beconsidered the starting point for the aforementioned theme
search, and in addition to promoting improvements to meetmarket needs, it also has the function of promoting new productdevelopment in cooperation with corporate research, etc. In our
traditional business areas of Chemicals and Cement, we are also
working to commercialize unique materials such as magnesium
hydride, which is a hydrogen storage alloy, and roadbed
materials utilizing biomass combustion ash.
Tokuyama’s research and development is conducted incollaboration with corporate research, the New Business Division,and business division development, with the entire company
working as one in order to achieve business growth.
1. TDX: Tokuyama DX
2. MI: Material Informatics

R&D Concept
Customers/Target Markets

Side-by-side support for development
Technology management support
DX technology support
Technology Strategy Dept.

Support for construction ofquality assurance system
R&D Quality Assurance Section

IP strategy support
Intellectual Property Dept.

Analytical technology support
Analytical Science Dept.

Process technology support
Process Development Dept.

ba

ku

Tsu

Theme transfer

New Business Divisionb.,

Commercialization and productimplementation

a

L
rch

sa
Re
D]
t▶
R& ama
e
en
t
y
ra ku
pm
n
rpo ., To aiwa eveloo[C Lab a T gy d ntham olo mearc okuy Techn velop
e
s
T ▶
de
Re

Ba

sic

Re

se

ct
h
a rc ro d uPTheme selection
Seed technology and information

 Industry-academia-government collaboration
 Startup companies
 IP landscape, etc.
 Tokuyama Group proprietary technology

Quality raising of R&D capabilities
Open innovation(Industry-academia-government
collaboration, collaboration with othercompanies) M&A / acquisition of highly
specialized personnel
R&D Planning Dept.

Healthcare

Chemicals

Theme transfer

Collaboration with business divisions
Development and Sales Dept.
at each Business Div.

Determinationof themes

Electronics
Focused injection ofmanagement resources

Environment Peripheral areas Downstream areas
 Cross-cutting areas

Cement

t]
pmen
iv.,
evelo siness D
ess D
arket
Bu
[Busin t Dept. in idiary nse to the mmen in Subsn in respo
p
lo
e
D
o
ti
R&
Dev
ializa

nd
ent a
lopm
Deve

erc
comm

Strengthening cooperation
Hardware commercialization support/
infrastructure, equipment
Center for Commercialization of Advanced
Technology
Engineering Div.

Valley of Death

For growthbusiness areas:

To businessgrowthSales information
MarketingMarket research
information

Theme search by backcasting from forecasts offuture social issues

Note: This image shows the organizations involved in R&D, focusing on their functions, and may differ from actual activities.

TOKUYAMA REPORT 2024

33

Growth Drivers

Human Capital
Enhancement of human capital vital for achieving
our Vision.
Execute a new human resources strategy in line with
8 strategic axes under the Human Resources Policy
Executive Officer, General Manager,
General Affairs & Human Resources Division

Takashi SatouIn order to respond to changes in the business environment, a
new Human Resources Strategy to be implemented from FY2024
was resolved at the Board of Directors meeting held in April 2024.
The aim of the new strategy is to create diverse and productive
human capital that meets the needs of work styles, with themessage of a “Human Resources Strategy to improve employee
value while contributing to the realization of a management
strategy" the objective is to explain specific stories that will lead tothe realization of a management strategy and the enhancementof the company’s corporate value.

The new Human Resources Strategy is positioned below
the Human Resources Policy, which is our philosophy onhuman capital, and is flexible enough to change according tomanagement strategy and the external environment. Considering
our management strategy, our Human Resources Strategy
requires us to recruit and develop personnel capable ofdemonstrating high performance to enable business portfoliotransformation, while at the same time, we must aim to firmly
improve the labor productivity of the traditional businesses that
support our growth businesses and to ensure the generation of
cash. In addition, to create a system and a culture that values
the diversity where diverse talents can flourish in order to
respond to the ever-changing business environment and the
evolving management of the Group, the realization of humancapital management with a view to the entire Group is also an
important area targeted by this Human Resources Strategy. In
order to resolve these issues, we will define eight strategic axes
in our Human Resources Strategy and implement each of ourmeasures in line with these strategic axes.
Going forward, the approach to human resources ofcompanies must change in the name of human capitalmanagement in response to changes of the management
environment. In order to respond to various changes, we will
increase engagement through solid dialog with our employees,
and each employee will grow in action that embodies thecontent of our strategy, thereby increasing corporate value
and realizing human capital management that our stakeholders
can appreciate.

34

TOKUYAMA REPORT 2024

Positioning of the Human Resources Strategy
Content shown

External and internal
environments• Defines the direction and beliefs
on personnel policy in line withthe management philosophy

Not affected

Human
Resources
PolicyBusiness environment:
Business portfolio transformation(creation of new business markets)
Demand for decarbonization
Stable operation of underlying
businesses
Labor environment Labor market
mobility
Declining birthrate and aging population• Identifying issues forrealizing themanagement strategy
and business strategy,
and key response
policies and strategic
KPIs

Human Resources
Strategy

Measures to realize
the strategy

It is essential for our human resources strategy to be aligned with the overallbusiness strategy, not only based on internal guidelines, and to be sustainable interms of human resources management. Furthermore, it is crucial to communicate
the human resource strategy to investors and the labor market in order to have thecompany's value accurately evaluated. We will proactively advance recruitment
activities, emphasizing the potential for a diverse range of talent to thrive, including
new graduates and experienced professionals.

Eight Strategic Axes Bridging the Gap toward Our Vision[Perspective]
Management
Strategy

Increase operational
productivity

Establishment of a Group
personnel system

Provision of humanresources to growthareas and new
projects

Recruitment andcreation of humanresources to drive thecompany’s growth

Infrastructure/effectivenessmeasurement
Visualization andutilization of humanresource-related data

Setting
Setting
KPIsKPIs

Our Vision
Human Resources Strategy to
improve employee value while
contributing to the realizationof a management strategy

Increasingengagement
engagement
Increasing

Responding to diversity ofvalues and ensuring fairness[Perspective]
ESG
Investment[Perspective]
Labor Market

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Measures for Implementing Strategy
Recruitment

Actively recruiting, retaining, and increasing the strength of strategic personnel

In terms of recruitment, securing personnel from a labor market in which the population is declining and aging, and the needs of working
styles are diversifying, is a pressing issue. We determine the personnel to be hired that are necessary for our business based on the
personnel plan established every year in accordance with our management plan. In this process, we not only establish the number of
employees to recruit but also assess the necessary human resource requirements to be applied to our businesses, such as whether torecruit from the new graduate market, which is centered on personnel who are expected to grow over the medium to long term, or to
recruit mid-career personnel who are expected to be ready for business; we secure personnel according to the characteristics of eachbusiness. In addition, in order to recruit the talented personnel required for business growth in the midst of a labor shortage, we redefine
the characteristics and strong points of the Company and demonstrate the attractiveness of the Company to the labor market througheffective media to develop a multilateral recruitment route that is appropriate for the region, technology, and work experience to ensure
continuous talent retention.

Development

Human resource management in collaboration with business divisions

Given the management environment of the Company, we need personnel who are active globally in growth businesses and have experiencein projects in difficult environments and project management, as well as personnel who can manage M&As. We will develop executive
candidates by identifying the experiences and skills needed for future sustainable growth and managing the careers of our employees.
In addition, in FY2024 a job-based personnel system was introduced in management roles, and in the future, we plan to formulate amedium-term succession plan for posts defined as important positions, and to develop human resources according to strategic staffing
plans and the content thereof.
On the other hand, in terms of overall employee development, the Company conducts training before and after each level of promotion,
as well as training and education to improve the level of knowledge of employees, and bears some or all of the costs to raise the overalllevel of knowledge and skills and to develop human resources that are capable of responding to changing business environments.

Evaluation
In light of the recent significant diversification of work styleneeds, we will consider meeting the needs of employees by
establishing multiple evaluation methods based on the type ofjob function and conducting evaluations based on each work
style, rather than a standardized evaluation of work results. In
addition, we plan to implement appropriate incentives based on
productivity to increase employee motivation toward improving
overall productivity.

Furthermore, in the evaluation of managerial positions,personnel evaluations will be conducted to assess the degree ofachievement of the duties required in the management plan in
conjunction with the introduction of the job-based system, andevaluations will be conducted in a scientific and fair manner bymonitoring the management status of the organization through a
360 degree evaluation and the results of the organizational
engagement survey.

Work Styles
One of the visions of the Company is to “Be a company withhealthy employees who have healthy families and take pride in
their work at their company” and has been selected as a Healthand Productivity Stock jointly by the Ministry of Economy, Tradeand Industry and the Tokyo Stock Exchange for the second
consecutive year. We will continue to promote management with
an awareness of a work-life balance so that employees can work
vibrantly in good health, both physically and mentally.
In addition, systems and operations for managing humanresources with a variety of wisdom and experience, as well as
women and mid-career hires, will be improved appropriately toensure that these people fulfill their potential, regardless of theconventional framework, to create a highly engaged human capital
structure where employees and the Company work together. In
FY2023, we adopted an open application system for some
employee transfers, and we have started measures that are basedon employees’ preferences.

TOKUYAMA REPORT 2024

35

Dialog with Employees

Aiming to create a corporate culture brimming with freshness in which
employees’ challenges are the driving force for business growth
In April 2024, we designed and introduced a new job-based personnel system for managerial positions,accelerating our efforts to transform the organizational culture and to expand human capital. What are
the thoughts and aims of junior managers at the forefront of business? Three new leaders, who were
promoted to managerial positions during the period from 2023 to this year, were asked to discuss the
future of Tokuyama as well as their own challenges.
Tokuyama Dental Corporation
Tsukuba Research Laboratory

Electronic & Advanced
Materials Planning Dept.

Hiroshi Morisaki

Satoko Yoshimura

Chemicals Planning Dept.

Hisashi So

Department and Responsibilities
Morisaki: I am very pleased to have this opportunity for an
exchange of opinions among junior managers.Since joining
Tokuyama in 2011, I have continued to pursue development
fields, and am now a leader in the Composite Materials
Development Department at Tokuyama Dental Corporation’s
Tsukuba Research Laboratory. As a recent topic,
OMNICHROMA®, a dental filling composite resin for which I
was involved in development, has won three technical awards
in Japan. Driven by OMNICHROMA®, the dental materials andequipment business has become a core part of the Life Science
Business Division. I feel motivated and a sense of mission toplay a role in transforming the business portfolio.
Yoshimura: I am a member of the Electronic & Advanced
Materials Planning Department and work in the procurementof raw materials and supplies. The supply chain for electronicmaterials is becoming increasingly complex every year, andsocial interest in environmentally friendly green procurement
has also risen. We cannot fulfill our mission by simply
purchasing inexpensive raw materials according to the

Our Challenge

TOKUYAMA REPORT 2024

So: After joining the Company in 2005, I worked on logistics
operations, implementation of ERP systems, and operation of
Tokuyama & Central Soda Co., Ltd. (as it was named at thetime), and in April 2024, I was appointed manager of theBusiness Planning Team of the Chemicals Planning
Department. In the past, we have worked on a wide range ofactivities, including sales strategies and business plans for adecarbonized society, with a global perspective of the market
for various chemicals, including soda ash, the business onwhich the Company was founded. At present, we are working
with our partner company to develop the market formagnesium hydride, which has started the pilot production at
the Tokuyama Factory.

As Leaders in a New Era

Morisaki: The important thing to do in R&D is not only tocreate innovative technologies that have never been possible
before, but also to bring them to market as products. In
addition to thinking and anticipating, engineers need to beable to execute the entire R&D process, from establishing
hypotheses to bringing new products to market. What I’m

36

requirements of the Manufacturing Department. In addition todeveloping new suppliers to ensure stable, high-quality
products, we are committed to implementing our medium- tolong-term procurement strategies, including establishing a
global procurement network and building new channels
through alliances.

mindful of now is to develop the future researchers, and to
improve the organizational capabilities of the Development
Division. We will contribute to the development of the Life
Science Business Division while respecting the “workplace
intuition” of each researcher and engineer.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
Strategy

Yoshimura: I worked for a foreign silicon wafer manufacturer
before joining Tokuyama in 2012. Moving from a foreigncompany to a long-established Japanese company with ahistory spanning more than 100 years, it took time for me to
get used to the culture and customs. However, I am gratefulthat I am now entrusted with the important task ofprocurement at the Electronic & Advanced Materials Division.
My challenge is to develop and implement an effective
procurement strategy that incorporates a medium- to longterm market outlook and a sustainability perspective. We are
striving to expand Tokuyama’s profits while optimizing theentire supply chain, from procurement of materials and raw
materials through to product logistics.

Management for Sustainable
GrowthCorporate Data

So: My challenge is to put the business of magnesium
hydride on track, which I mentioned at the beginning.
Magnesium hydride, a hydrogen-absorbing alloy, is receiving
great attention both inside and outside the industry as anext-generation hydrogen carrier that can safely and easily
store and transport hydrogen. I would like to promote theutility and potential of magnesium hydride for industry in awide range of areas, and to enhance the market value of thisproduct by establishing a stable production and supply
system and strengthening cooperation with our partner.

Tokuyama’s Corporate Culture
Morisaki: Compared to other companies in the industry inJapan and overseas, I think there may still be a relaxedatmosphere. However, in the past few years, I feel that more
and more employees have experienced a sense of alarmconcerning the Company’s current situation. At Tsukuba
Research Laboratory, mid-career recruits account for morethan one-third of researchers, and the diversification of humanresources has allowed the organization to become morevibrant. The main actors in research and development are“people,” and I view this change as a great opportunity tofurther accelerate Tokuyama’s value creation.
Yoshimura: Like Mr. Morisaki, I am one of the people who
feel that the organization is revitalized by recruiting external
personnel. I think the feeling varies considerably depending on
the business that people are engaged in, but in the Planning
Dept. I belong to, I think there is an environment in which
employees can express their opinions without hesitation andfreely discuss them with colleagues and supervisors. We haverecently launched a new job-based personnel system. I thinkthat employees will become even more motivated by ensuringthat job descriptions, which are a key part of system design,
fully permeate the organization.
So: I am part of a traditional business, and I sometimes feelthat I am more oriented toward being conservative and stable.
On the other hand, there are also signs of change, such as
the communication of messages by the General Manager ofGeneral Affairs and Human Resources via internal radio, theintroduction of a new personnel system, and the moredetailed recommendation to talk to each other by name rather
than referring to people by their position. However, it is also
true that the old conservative stance of duties and strict
control systems are effective in the operation of the Chemicals
business, where stable operation is a priority. I believe thatchanges to the corporate culture need to be handled in linewith the characteristics of the business and the division.

Aspirations for the Future
Morisaki: Tokuyama is currently focusing on growth areas inorder to transform its business portfolio. To develop products
required by the market and evolve into a value creationcompany, it is essential to develop leaders who will takecharge of the next generation. In addition, if leaders cannot
clearly communicate the business vision and processes forrealizing this, productivity will not increase across theorganization as a whole. I aim to be a leader who can clearlycommunicate my vision and goals in my own words and to
fully draw out the capabilities of my subordinates.

So: For many years, Tokuyama has contributed to industrial
development in Japan and overseas, and has received strong
trust from local communities. In my involvement in the
traditional business of chemicals, when I touch the Tokuyama
logo on a tanker truck, for example, I get a feeling that I willcontinue to cherish the intimacy and pride of the community,
employees and their families. We will promote magnesium
hydride technology as soon as possible, create a world wherehydrogen can be used safely and with peace of mind by
everyone, and will expand the view around the world that
Tokuyama is a positive force for society.

Yoshimura: I think the great joy of working is to feel thegrowth of myself and my team. For people to grow, it isessential that they are not afraid of failure and embrace thechallenge of new issues and themes. I will not only embrace myown business challenges, but will also support the challengesof my subordinates and junior employees, and strive to create adynamic corporate culture full of pioneering spirit.

TOKUYAMA REPORT 2024

37

Message from the Executive Officer in Charge of Sustainability
Executive Officer
General Manager, the Corporate Social Responsibility Division

Michiko Seki
Tokuyama’s Views and System on Sustainability
Tokuyama has established the Tokuyama Group Sustainability
Principles in order to realize our Vision based on our mission “tocreate a bright future in harmony with the environment, in
collaboration with its customers, based on chemistry,” and wewill create new value in harmony with the environment by
supplying products that contribute to the solving of social
issues while minimizing the environmental burden caused byour business activities.
The figure below shows the overall picture of thesustainability-related meeting bodies, with the number of
meetings held in FY2023 noted in parentheses. The CSR
Promotion Council is chaired by the President and includes all
executive officers, and each committee is chaired by the
director in charge and consists of the heads of the relevant
Promotion System
on Sustainability
Board of Directors

departments. In promoting CSR management, decisions onimportant matters and matters for approval are supervised by
the Board of Directors.
Regarding efforts to address climate change and humanrights, a task force has been established under the
Sustainability Committee to bring together a wide range of
relevant divisions, consider the issues, and promote them as
Company-wide activities. In addition, we have also started
working on biodiversity by establishing a working group
under the Environment Committee, and in June 2024 weendorsed the philosophy of the Taskforce on Nature-related
Financial Disclosures (TNFD) and announced our participationin the TNFD Forum.

Expert Committees(Number of Meetings Held in FY2023)

Main Risks Managed

Financial Reporting Committee (8)Financial and accounting risks

Fair Trade and Competition Committee (1) Risk of violation of antitrust laws and unfair competition prevention laws
Security Trade Committee (1)Trade control risks (inadequate security trade control)

Information Security Committee (2)Information security risks (cyber attacks, information leaks, system failures, etc.)

Environment Committee (1)Environmental risks (hazardous pollutant spills, noise, odor, illegal dumping and disposalof waste, etc.)

CSR Promotion Council (1)Safety Committee (1)Accident risk (fire, explosion, chemical leak, etc.), industrial accident risk

Risk Management andCompliance Committee (2)Product Safety andQuality Assurance Committee (1)Quality risk (management of chemical substances contained in products, unfair anddeceptive representations, distribution accidents, etc.)

Sustainability Committee (2)Climate change risks, human rights risks, etc.

Executive Committee
Strategy Committee

President

Establishment of Sustainability Governance38

TOKUYAMA REPORT 2024

the People of Tomorrow,” and the desire to “be a company
that lasts into the future.” To this end, we intend to enhancethe evaluation by our stakeholders and corporate value
through effective Group-wide initiatives and disclosure.
Policies on Sustainability
Tokuyama’s Vision
Mission Vision and Values
April 1, 2024
Based on the Vision,
established the“philosophy” that
supports the strategy
and various policies interms of governance.

Corporate Governance Policy

Practicing socially responsible management is one of thehigh-profile issues in Medium-Term Management Plan 2025,
and we have clearly stated our attitude and approach tosustainability as the foundation of our policy, which ispracticed throughout the Group. In addition, KPIs formaterialities, which are priority CSR issues, are determined
and monitored by the CSR Promotion Council in order tostrengthen our initiatives. From FY2023, we will clarify the
responsibilities of all executive officers for addressing
materiality, and reflect the progress made in theirremuneration for the following fiscal year.
In order to further clarify the roles and responsibilities of
directors, we have established a Corporate Governance
Policy, which promotes efforts to address management
issues, including sustainability, from a governance
perspective, and establishes a system to further increase theeffectiveness of the execution of duties by Directors.
In response to the recent demands and expectations ofstakeholders as well as sustainability-related initiatives andinformation disclosures, it is important to respond on aGroup-wide basis. We will promote internal control,
improvement of whistleblowing systems, risk management,
non-financial information disclosure, response to climatechange, human rights, and human capital initiatives, all ofwhich are centered on Group management. Although thebusiness domains of each Group company are different,
I believe that they all share the same corporate slogan, “For

December 1, 2022
Established

Develop and systematize
sustainability policies
guided by Tokuyama’s
redefined Vision.
Prepare for non-financial
information disclosure

Sustainability
Principles

April 1, 2023
Established the
Tokuyama Group
Sustainability Principles

Code of Conduct

April 1, 2023
Revised the TokuyamaGroup Code of Conduct

Various Policies
Human Rights
PolicyHealthManagement
PolicySafetyManagement
PolicyQuality Policy

Environmental
PolicyBasic Purchasing
Human
Anti-Corruption
PolicyResources Policy
PolicyMateriality (CSR Priorities)
Helping tofight global
warming

Conserving theenvironment

Preventing
accidents andpreparing fordisasters

Engagingwith local
communities

PromotingCSR
procurement

Developing
human resources

Developing products Improved chemical
and technologies that management andaddress social issues product safety
Promotingdiversity andcareer fulfillment

Promotingphysical andmental healthTokuyama Value Creation

Management for Sustainable
GrowthProgress of Growth
Strategy

Value Creation Strategy

Corporate Data

Progress of Sustainability Initiatives in FY2023
To make a “Contribute to Mitigating Global Warming,” one ofthe priority issues in Medium-Term Management Plan 2025,
we have made progress in reducing GHG emissions (Scope
1 and 2) by 13% compared to our target of a 30% reduction
by FY2030 (compared with FY2019). Furthermore, we areworking toward the realization of carbon neutrality byaddressing both the risks related to climate change and thepotential new business opportunities in the environmental
field. This includes the impact of making visible the carbon
costs coming from the introduction of internal carbon pricing,addressing the impact of potential changes in customer
procurement policies, and identifying the impact on financing
from potential policy changes at financial and investmentcompanies.
Targets were previously established for Scope 1 and 2,
but we have also set a new emission reduction target for
Scope 3. Since categories 1, 3, and 4 account for more than
90% of the Group’s Scope 3 emissions, we aim to achieve a
10% reduction by FY2030 (compared to FY2022) relative tothe total amount in these three categories. In terms of ourperformance in FY2023, we were able to achieve a 5%
reduction in Scope 3 emissions compared to the baseline
year of FY2022. Going forward, we will embrace thechallenge of making the entire supply chain carbon neutral
and strengthen our supply chain engagement activities.
Also, we participated in the GX League promoted by the
Ministry of Economy, Trade and Industry. To participate in the
GX League, we are required to set GHG emission reduction
targets in accordance with the standards set by the GX
League, and we have set targets for Scope 1 and 2 on a
non-consolidated basis and for our consolidated
manufacturing subsidiaries in Japan, in addition to the GHG
emission reduction targets we have set in accordance with
the GHG Protocol. Although the GX League’s data differsfrom that established in accordance with the GHG Protocol interms of the baseline year and emissions calculation method,the original data is common and the reduction targets are
consistent. In FY2023, we were able to achieve an 11%
reduction compared to the baseline year of FY2021.

Medium- to Long-Term GHG Emissions Reduction Targets(Scope 1 and 2)

Medium- to Long-Term Supply Chain Emissions
Reduction Targets (Scope 3) (Categories 1, 3 and 4)(Ten thousand tonnes-CO2e)

800

Waste-derived
Raw materials-derived
Originating from fuels-derived

30% reduction compared
726

200

to FY2019

600

508

Achievementof carbon
neutrality by

to FY2022

167

FY2050

100

200

50

0

0

2030

10% reduction compared
186

150

400

2019 2020 2021 2022 2023

Category 4
Category 3
Category 1(Ten thousand tonnes-CO2e)

2050 (FY)

Base year

Challenge to
Caron
Neutrality by
FY2050

0

0

2022

2023

2030

2050 (FY)

Base year

What Needs to Be Addressed from Now
Toward the final year of Medium-Term Management Plan
2025, we will implement the PDCA cycle for each CSR issue
we have set as a target. For Practice socially responsible
management, I think the following three approaches arecommon for tackling any issue: (1) to address medium- andlong-term goals (Vision), and to incorporate them into effective
Group-wide initiatives, (2) to move forward while getting
stakeholders widely involved, and (3) to disclose information
externally and leverage feedback from stakeholders for the
next step. In particular, the external disclosure of non-financial
information will be essential for accountability in businessactivities and the transparency of our governance.
As was discussed in the evaluation of the effectiveness of
the Board of Directors, the scope and content ofsustainability-related considerations have expanded, and wefeel there is a need to review the positioning of meetingbodies and committees, as well as the members who
participate in them. We would also like to also rebuild theoverall structure so that discussions by the members involved
become more active.
For Tokuyama “to create a bright future” and besustainable, we will consider the sustainability that is now
required of a company in a timely manner, and disclose
information externally that is used for determining corporate
value, including the ESG, respond to stakeholders’ trust, andcontribute to more improvement of our corporate value.

TOKUYAMA REPORT 2024

39

Vision and Materiality

Achieving Our Vision through Socially Responsible (CSR) Management
To realize our mission “to create a bright future in harmony
with the environment, in collaboration with customers,
based on chemistry,” we must first correctly understand the
expectations and requirements of society, and then make surethat every person in the Group has a “vision” of what needs tobe done and a “sustainability perspective” in order to work
every day from a long-term perspective and to have anawareness of potential social issues. This attitude and thisbehavior are also important for us as we move from thetraditional business model and transform ourselves into avalue creating company. In other words, Tokuyama’s CSR
management covers the creation of new value for asustainable society and it should be promoted by theconcerted effort of all managers and all employees.
   The Tokuyama Vision has been developed so that we
can clearly visualize our future image in order to realize our
Mission. Materialities (material issues) refer to priority CSR
issues for CSR management that are used when formulating
an action plan for realizing our Vision.

   We work on our initiatives to realize our Vision, whileconnecting materiality with the objectives of the divisions anddepartments. Every year, these are reported to the CSR
Promotion Council, and are shared with all executive officers.
The relevant materialities are also taken into account as a factor
in the calculation of executive officer compensation. We areworking hard to continually raise the level of CSR management
by following the Company-wide PDCA cycle that we use tocheck on progress and analyze current conditions.
   The Sustainability Committee, established in FY2022,
has begun to promote CSR procurement and information
disclosure based on the TCFD recommendations. In addition,
following the establishment of the Tokuyama Group Human
Rights Policy in December 2022, we have developed policies
such as establishing the Tokuyama Group Sustainability
Principles and revising the Tokuyama Group Code of Conduct
in April 2023.

Tokuyama’s Materiality
Material issues are used as guidelines to devise actionplans for realizing Tokuyama’s Vision. The table below
shows the aspirations and KPIs for each material issue aswell as results and the people and departments who areresponsible. Our actions for addressing materialities also
contribute to the realization of the UN’s SDGs. For
reference, our material issues and their main SDGs areshown in the table below.

Materiality KPIs and Results
Materiality
Relationship to SDGs

Helping to fightglobal warming

Our Vision•	Achieving carbon neutrality (CN)by FY2050

KPI / Target•	Reduction of Tokuyama’s GHG emissions by FY2030:- 30% reduction in Scope 1 and 2 (compared to FY2019)- 10% reduction in Scope 3 (categories 1, 3, and 4) (compared to FY2022)•	Active disclosure of climate-related information

Conserving theenvironment•	Promoting recycling andmaintaining zero landfill waste•	Maintaining low emissions ofenvironmental impact substances•	Complying with legal requirements
and other regulations, achievementof zero environmental accidents•	Contributing tobiodiversity conservation

Preventing accidents
and preparing
for disasters•	Accident prevention anddisaster preparation•	Improvements in process safety
management level•	Fostering and improving
the safety culture40

TOKUYAMA REPORT 2024

•	Complying with legal requirements and other regulations: achievement of zero violations•	Continued achievement of zero environmental accidents: zero accidents•	Reduced environmental impact:- Effective utilization rate for waste ≥94%
- Zero waste emission rate ≥99%
•	Enhancing dialog with stakeholders and information disclosure•	Contributing to biodiversity conservation: Responding to TNFD•	Effective use of water resources: Reduction of water consumption(excluding seawater) (below FY2019 standard)•	Zero accidents and zero lost time injuries•	Deepened risk assessment•	Promoting smart security

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Process of Identifying Materiality
In 2019, the Company identified nine material issues basedon important social factors, dialogs with stakeholders, andthird-party opinions from external experts. In 2021, after
reviewing these issues, in line with the new Medium-Term
Management Plan 2025, we increased the number ofmaterialities (material issues) to ten, then formulated targets
and KPIs for FY2025.

1

STEP

2

STEP

Extract and organize social issues fromthe social requirements and Tokuyama’s
business activities

Order of priority
Decide on the priority based on importanceto stakeholders and Tokuyama

Review by experts

3

Review priorities and quantifications (metrics)
based on feedback from outside experts

STEP

Commitment from management

4

CSR Promotion Council discusses suitabilityof material issues and approves them

Very
Important

Importance to Society and Stakeholders

STEP

Extract and organize issues   We are determined to always take action for building asustainable future with society, to contribute to resolvingsocial issues, and increase trust from diverse stakeholders, as
we aim to improve corporate value. Tokuyama will solidify
relationships of trust with society by strengthening initiatives
for dealing with material issues, while pursuing our own
unique approach to CSR management.

Important

For detailed information on our activities, please refer to the CSR
section of Tokuyama’s website.
https://www.tokuyama.co.jp/eng/csr/

FY2023 Results•	FY2023 GHG emissions:- 13% reduction in Scope 1 and 2- 5% reduction in Scope 3• Promoted coordination with regions, local governments, and within the industrial complex, aiming for CN• Considered the introduction of alternative fuels, such as biomass and ammonia• Disclosures based on TCFD recommendations• Submission of GHG emissions data for GX League baseline year
• CDP Climate Change Questionnaire score: A-

Helping to fightglobal warming

Conserving the environment
Preventing accidents andpreparing for disasters
Engaging with local
communities
Promoting CSR procurement

Developing products andtechnologies that addresssocial issues
Developing human resources
Promoting diversity andcareer fulfillment

Improved chemical
management andproduct safety

Promoting physical/
mental health

Very
Important

Importance to Tokuyama○: 95% or more △: 60% or more ×: less than 60%

Achievement
Level

Person Responsible*
Department Responsible
Director (President and Executive
Officer)
Carbon Neutral Strategy Division
Responsible CareManagement Department
Factory Planning and
Administration Department•	Achievement of zero violations of legal requirements, etc.
•	Zero environmental accidents•	Reduced environmental impact: Not achieved- Effective utilization rate for waste: 92%- Zero waste emission rate: 97%•	Raising awareness of biodiversity

Director (Chairperson of Environment
Committee)
Responsible CareManagement Department• Water usage reduction rate (compared to FY2019): -18.5%•	Zero serious accidents/disasters•	Identified risks through risk assessment and began mitigation•	Promoting smart security

Director (Chairperson of Safety
Committee)
Responsible CareManagement Department* Person responsible: Someone who serves as a director and chairperson of the committee/meeting body that he/she is in charge of

TOKUYAMA REPORT 2024

41

Vision and Materiality

Materiality
Relationship to SDGs

Developing products andtechnologies that
address social issues

Our Vision•	Increased development of products
and technologies that help toresolve social issues, focusing
on SDGs

KPI / Target•	Promoting the development of products and technologies that help to resolve
social issues, focusing on SDGs

• Transform business portfolio

Improving chemical
management andproduct safety

Engaging with local
communities•	Maintaining effective chemical
management and promoting
product safety within Tokuyama•	Harmoniously co-existing andcooperating with communities•	Contribution to communities

Promoting CSR
procurement• Management of supply chainsbased on CSR procurement
guidelines•	Complying with chemical laws and regulations in each country: Zero infractions ofchemical-related regulations•	Risk management of chemical products, including the whole Group: Zeroaccidents due to product safety•	Harmoniously co-existing and cooperating with communities•	Helping resolve community issues and contributing to sustainable development•	Improvement and execution of management and investigation of supply chainsbased on CSR procurement guidelines•	Creation of management processes

Developing humanresources

Improve employee value while
contributing to the realization of amanagement strategy•	Establishment of an incentive system to support productivity improvements1• Increase operational productivity•	Percentage of successor candidate positions filled for key management positions: 100%

• Provision of human resources togrowth areas and new projects• Recruitment and creation ofhuman resources to drive theCompany’s growth•	Percentage of positions filled relative to human resource plan: 100% ± 10% every year•	Number of NBL (Next Business Leader) training participants: A total of 100 by 20301•	Global human resources development training: 15 participants each fiscal year
until FY20251• Training highly skilled engineers to support business execution2•	Promotion of diversity and inclusion•	Percentage of women hired with a bachelor’s degree or higher: 20% or
higher every year2

Promoting diversity andcareer fulfillment• Responding to diversity of values
and ensuring fairness• Increasing engagement• Respect for human rights•	Percentage of managerial positions or higher held by women: 15% orhigher in FY2030•	Promotion of employment of persons with disabilities: Achievement oflegally mandated level1• Employee engagement: Ongoing improvement1• Promotion of work-life balance• Acquisition rate of men taking childcare leave ≥100%2• Percentage of annual paid leave taken: 75% every year2• Promotion of respect for human rights

Promoting physical/
mental health•	A state in which employees canwork vigorously and play an activerole through the cultivation of thephysical and mental health of
employees and their families, andthe creation of a work-friendly
environment

1. Non-consolidated   2. Non-consolidated and domestic consolidated subsidiaries

42

TOKUYAMA REPORT 2024

• ‌Enhanced individuals’ awareness of health1: Smoking rate <15%
• Maintaining and lowering percentage of findings1• Regular health consultation rate: 100%1• Re-examination rate: ≥90%1• Specific health guidance rate: ≥80%1• Lowering the leave rate: <0.5%1• Stress check examination rate: ≥95%1• Certification as a health and productivity enterprise: Obtain White 500 certification1

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data○: 95% or more △: 60% or more ×: less than 60%

FY2023 Results•	Electronics: Accelerate efforts to commercialize customer-driven products by strengthening
marketing functions, with some themes moving into the commercialization phase•	Healthcare: Accelerate development by narrowing down commercialization themes andconcentrating resources•	Environment: Move several themes into the commercialization phase. Promote new carbon neutral
related themes.
•	Traditional business areas: Develop and launch products that address environmental issues, anddevelop process technologies•	Other: Grants for academic and research purposes•	Zero infractions of chemical-related regulations•	61 product reviews (second and third rounds); 787 labeling reviews•	Understood and responded to domestic and overseas regulatory trends•	Promoted the management system for chemicals contained in products•	Provided education to departments and Group companies involved in chemical productmanagement and conducted regular inspections and interviews on their state of management•	Dialog with community: Community dialog, roundtable meetings, factory tours, etc.
•	Social contributions: Volunteer activities, educational support to neighboring schools, anddonations to contribute to the local community•	Contributions through business: Specified supply of power to Shunan City•	Raised awareness of the CSR procurement guidelines that were revised in December 2022
Requested written consent from companies with a transaction value of ¥30 million or more
Collected from 310 out of 323 companies1•	Implemented supplier assessments for companies with a transaction value of ¥100 million or moreby using the SAQ published by GCNJ Collected from 173 out of 181 companies1•	Analyzed SAQ collection results and conducted engagement with 5 high risk companies1•	Establishment of incentive system: Preparation of system design1•	Percentage of positions filled relative to the human resource plan: Implementation of target setting(no actual values as this is an indicator to be measured starting in FY2024)•	Percentage of successor candidate positions filled for key management positions: Implementationof target setting (no actual values as this is an indicator to be measured starting in FY2024)•	Implemented NBL training: Attended by 30 select employees (cumulative total of 67)1•	Implemented global human resource development: Attended by 16 employees1•	Training highly skilled engineers to support business execution2•	Implemented DX workplace leader training and data engineer training•	Implemented DX literacy training (e-learning): Attended by 1,400 employees

•	Promotion of diversity and inclusion•	Percentage of women hired with a bachelor’s degree or higher: 30.1%2•	Percentage of female managers: 8.2%
•	Percentage of people with disabilities: 2.29%1• Conducted employee engagement survey: 94.7% response rate, visualized priority issues1•	Promotion of work-life balance•	Acquisition rate of men taking childcare leave: 47.3%2•	Percentage of annual leave taken: 76.5%2•	Implementation of human rights due diligence, etc.

•	Promotion of anti-smoking measures1
・Smoking rate: 17.8%
・Establishment of smoking-free zones
・Implemented anti-smoking campaign•	Health guidance and measures after health diagnosis1
・Regular health consultation rate: 100%
・Re-examination rate: 87.4%
・Specific health guidance rate: 93.0%•	Mental health care support1
・Leave rate: 0.69%
・Stress check examination rate: 97.7%
・Implementation of mental health training and e-learning•	Selected as a Health and Productivity Stock and obtained certification as a health and productivity
enterprise (White 500) in FY20241

Achievement
Level

Person Responsible*
Department Responsible

Director (in charge of Research &Development)
Research & Development Division

Director (Chairperson of Product
Safety and Quality AssuranceCommittee)
Responsible CareManagement Department

Director (in charge of CSR, andGeneral Affairs and Human
Resource)
General Affairs Department
Environment & Safety Department
Factory Planning and
Administration Department

Director (Chairperson of Sustainability
Committee)
Procurement Department
Logistics Department

Director (in charge of General Affairs
and Human Resources)
Human Resources Department

Director (in charge of General Affairs
and Human Resources)
Human Resources Department

Director (in charge of General Affairs
and Human Resources)
Health Care Center* Person responsible: Someone who serves as a director and chairperson of the committee/meeting body that he/she is in charge of

TOKUYAMA REPORT 2024

43

Disclosures Based on TCFD Recommendations

The Tokuyama Group supports the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD)
and has conducted repeated investigations into climatechange risks and opportunities based on the TCFD
recommendations. In FY2023, we further expandeddisclosure information in accordance with the framework of“Governance,” “Strategy,” “Risk Management,” and “Metrics
and Targets,” recommended by TCFD and set and disclosed
reduction targets for Scope 3 emissions in order to take on
the challenge of reducing GHG emissions in our supply chain.
See Disclosures Based on TCFD Recommendations(Tokuyama TCFD Report, or TCFD Report) for more details.

Disclosures Based on TCFD Recommendations (TCFD Report)
https://www.tokuyama.co.jp/eng/csr/global_warming.html#section2

1 Governance
The Tokuyama Group has identified climate change as one of themost significant management risks. Accordingly, contributing to
mitigating and preventing global warming is one of the priority
issues under Medium-Term Management Plan 2025. The
Sustainability Committee, which is positioned under the CSR
Promotion Council, has established a system to identify andevaluate important risks and opportunities related to sustainability

across the organization. Items of special importance are
discussed by the CSR Promotion Council, and reported to andoverseen by the Board of Directors. Since April 2023, Tokuyama
has been accelerating efforts by establishing the Carbon Neutral
Strategy Division, which operates independently. The TCFD
Report provides more details, including supervision by the Boardof Directors and the role of the management team.

System to Promote Carbon Neutrality Achievement
Consistency with Group-wide Policy

Sustainability Committee

Board of Directors

ReportCSR Promotion
CouncilPresident andall Executive Officers

Environment Committee• Ascertaining GHG emissions and implementing energy-saving measures• Corporate Social Responsibility Div., Tokuyama Factory, Kashima
Factory, and business divisions

Measure proposal
Supervise

President
ReportDecisions andoversight

Resolutions
and Report

Carbon Neutral Strategy Division• Reporting and investigating on decarbonization initiatives

Guidance
Support
Requests

Divisions and group companies

Supervise• Examination of cross-organizational issues related to sustainability,
including climate change• Corporate Planning Div., Carbon Neutral Strategy Div., Corporate Social
Responsibility Div., General Affairs & Human Resources Div., and anyother divisions specified by the chairperson

Measure implementation

Executive
Committee
President andall Executive Officers

Division meetings• Deliberation on important matters and investment for
decarbonization initiatives

2 Strategies and Risks
Medium-Term Management Plan 2025 incorporates both therisks and business opportunities that arise in society as it
moves toward decarbonization. In addition, our aim is tomonetize promising business opportunities while reducing
climate change risks by shifting our business portfolio fromenergy-intensive to value-creating companies based on
analysis using international risk scenarios. Tokuyama positions
climate change risk as the most important risk. Given the44

TOKUYAMA REPORT 2024

accelerating global trend toward decarbonization, we havedecided that we must shift away from our energy-intensive
business structure, which has been our strength up to thispoint. “Contribute to Mitigation of Global Warming” has been
set as one of the priority issues of Medium Term Management
Plan 2025, and we are pursuing Group-wide initiatives toachieve this. The TCFD report provides a detailed report ofthese strategies and risks.

Tokuyama Value Creation

Value Creation Strategy

Management for Sustainable
GrowthProgress of Growth
Strategy

Risks Posed by Climate Change (Scenario Analysis)
Scenario

Risk
category

Target of risk
assessment

Potential impact on the Group(Financial) (Identified risks)• Increase in operating costs due toexpanded carbon pricing

Government
policy andregulations

Technology

Green processadoption measures

Short term: by FY2025, medium term: by FY2030, long term: by FY2050
Financial
impactTiming of risk Impact onmaterialization businessMedium tolong term

Large

High

Large

Medium tolong term

Large

High

• Increased green energy production
and procurement costs

Large

Medium term

Large

High

• Increased costs for green material
procurement and green process
conversion due to lack of technology
and market maturity

Large

Medium tolong term

Large

High

Large

Medium tolong term

Evaluation bystakeholders•D ecline in market value and increase infinancing costs due to a poor evaluationof carbon neutrality initiatives• Risk of litigation by local residents
demanding shutdown or decommissioningof coal-fired power plants•S ustainability risks for biomass fuelPenetration ofgreen procurement
by customers•R ejection of products by the market
based on large carbon-footprint
evaluation• Deterioration of profits due to an inability
to recover green initiative costs byraising prices

Large

Medium tolong term

Lost opportunities
due to a failure tokeep up with green
market expansion•O pportunity loss due to delays inbuilding a green supply chain• Lost opportunities due to insufficient
efforts for entering the circular economy
and the carbon recycling fieldLarge

Physicalrisks(Acute)More frequent
extreme weather
events and rising
sea levels•W ind and flood damage to production
plants; production plan delays andincreased costs due to supply chain
disruptions, etc.

Physicalrisks(Chronic)

Long-term
intensification of
extreme weather
events and rising
sea levels•D ecrease in production capacity due
to insufficient factory cooling capacity
caused by rising average temperatures•P roduction halts due to storm surges
caused by rising sea levels

1.5°C
Evaluation

Market4°C

Scenario

Market1.5°C

Resourceuse
efficiency

Opportunity
assessment target

Response measures• Initiatives to reduce GHG emissions
through fuel conversion (biomass andammonia)• Promoting GHG emission reduction
measures by adopting internal carbon
pricing• Enhancing initiatives to help promote
green transformation by participatingin the GX League• Investigation of ammonia supply
chain establishment at the Shunan
petrochemical complex• Ensuring stable procurement ofcertified biomass fuel by building
relationships with suppliers• Development of black pellets• Calculation of product carbon
footprint (CFP)High• Improving information disclosureand steadily working to reduce GHG
emissions• Dialogue with the local community• Business portfolio transformation• Procurement of certified biomass fuel

Large

High

• Steadily reducing GHG emissions
through energy conservation and fuelconversion, etc.
• Consideration of obtaining massbalance certification• Enhancing supply chain cooperation
for green market formation• Construction of a carbon footprint
evaluation system

Medium tolong term

Large

High

• Prompt implementation of measures

Moderate

Long term

Moderate

Moderate• Enhanced business continuity
plan measures

MinimalLong term

MinimalLow• Maintaining capacity throughequipment modifications, etc.

Climate Change Opportunities (Scenario Analysis)
Opportunity
type

Priority
level

Large

Carbon pricing andenergy procurement• Increase in costs for mitigation initiatives
costs
due to tightening of the GHG emission
regulations

Corporate Data

Large

Short term: by FY2025, medium term: by FY2030, long term: by FY2050

Impact on Tokuyama Group

Impactlevel

TermPriority
Level

Expanding demandin the environmental
market•E
 xpansion of businesses offering waste disposal,
effective utilization of resources, and measures tocombat global warming

Large

Medium tolong term

High•C ommercialization of renewable resourcesand energy

Shift to carbon
neutrality by regions
and industrial
complexes• Enhancing site competitiveness by promoting
large-scale green supply chains for energy
and materials

Large

Medium tolong termHigh• Green supply chain construction conducted
and promoting green technology development
through the Shunan Industrial Complex
Decarbonization Promotion Council

Requests for CCUrelated products andservices•E ntering new business fields by establishing acarbon recycling system

Large

Medium term

High

•A
 ccelerating R&D, demonstration projects,
and actual green technology adoption inbusiness operations

Response measures

3 Metrics and Targets
We are aiming to reduce fuel-derived GHG emissions bypromoting energy-saving measures and switching to non-fossil
fuels, and to reduce raw materials-derived GHG emissions by
reducing the use of limestone as a raw material. While thesteady reduction of GHG emissions is our responsibility as acompany, we also recognize that reducing GHG emissions
caused by our products is important (see page 46). In FY2023,
we promoted fuel conversion initiatives and initiatives with local

governments and companies in the industrial complex. In
addition, we have implemented initiatives towards
opportunities, such as promoting the water electrolysis
business. The TCFD Report provides details of climate-related
metrics, Scope 1, Scope 2, and Scope 3 GHG emissions, aswell as the targets and performance against the targets, andthe specific approach aimed at a decarbonized society.

TOKUYAMA REPORT 2024

45

Disclosures Based on TCFD Recommendations

Initiatives to Achieve Carbon Neutrality by FY2050

Fuels-derived(Ten thousand tonnes-CO2e)

800

Materials-derived

Waste-derived

726

Compared to
FY2019

700

632

30 %
reduction❶ Fuels-derived

600❸ Waste-derived

500· Co-firing of biomass/ammonia· Effective use of local energy· Energy conservation, process
improvement, and equipment upgrades· Transform the business portfolio❷· Suspension of one cement kiln line,
increase volume of small amount of
mixed ingredients❸· Thermal recycling❹· Increase percentage of co-firing of
biomass/ammonia and progress tomonofuel combustion· Use of renewable energy· Transform the business portfolio· More effective use of local energy· Energy conservation, process
improvement, and equipment upgrades· Improve the energy efficiency of theindustrial complex❺· Ca recycling· Offer low-GHG-emission cement/concrete· Transform business portfolio❻· Thermal recycling❼· Conversion to innovative manufacturingmethods❽· Introduction of negative emission
technology (CCUS)· Offsets (J credits, etc.)

508 ❹ Fuels-derived❷ Materials-derived

400

❶

300
❻ Waste-derived

200❺ Materials-derived❼ Innovative technologies

100

0
2019
Base year

2023

2030

2050
FY2050(FY)❽ Carbon offsets

Achievement of carbon neutrality

4 Initiatives to Address Climate Change
Improve the energy efficiency of theindustrial complex
Introduction of negative emission
technology (CCUS)

Reduction of emissions
from fuels
Carbon offsets- Shunan Industrial Complex Decarbonization Promotion Council The Shunan Industrial Complex Decarbonization Promotion Council wasestablished by Shunan City, the Society for Chemical Engineers, Japan,
and companies in Shunan Industrial Complex (Idemitsu Kosan Co., Ltd,NIPPON STEEL Stainless Steel Corporation, Zeon Corporation, Tosoh
Corporation and Tokuyama) in order to share the new challenge of
maintaining and strengthening the competitiveness of Shunan Industrial
Complex companies and to contribute to the realization of carbon
neutrality by drawing up a future vision for decarbonization andpromoting social implementation initiatives, including technology
development, evaluation, demonstration, and policy recommendations.
Discussions began in February 2022 and a grand design for the Shunan
Industrial Complex in 2050 was announced in May 2023. In FY2023,
subcommittees set up within the Council having been proceeding withthe examination of each of these themes.

Structure of the Council

Members

Observers

46

TOKUYAMA REPORT 2024

▶Society of Chemical Engineers, Japan ▶Shunan City
▶Five companies at the Shunan Industrial Complex
・Idemitsu Kosan ・NIPPON STEEL Stainless Steel・Tokuyama ・Tosoh ・Zeon▶Ministry of Economy, Trade and Industry▶Ministry of Land, Infrastructure, Transport and Tourism▶Ministry of the Environment▶Yamaguchi Prefecture▶Yamaguchi University

Development of alkaline
water electrolyzers

Business Opportunities

Tokuyama and Nippon Shokubai Co., Ltd. are conducting the Projectfor Developing Large Alkaline Water Electrolyzers and Separators
Suited for High-pressure Electrolysis as a project commissioned by
NEDO under the framework of the Collaborative Industry-AcademiaGovernment R&D Project for Solving Common Challenges Toward
Dramatically Expanded Use of Fuel Cells and Related Equipment as
Technology Development for Diversifying Fuel Cell Use.
  A high-pressure alkaline water electrolyzer (high-pressure AWE)
is a device that produces hydrogen and oxygen by supplying an
alkaline solution to cells separated by separators and passing
electricity through them. Hydrogen is attracting attention as anext-generation energy source, and there are high expectations
worldwide for low-carbon hydrogen produced with electricity derived
from renewable energy sources.
  This project aims to develop a world-class competitive highpressure AWE by combining the development of a large separator
suitable for high-pressure systems by Nippon Shokubai and thedevelopment of the internal structure of the electrolyzer thatmaximizes the performance of the separator by Tokuyama. The
separator developed by Nippon Shokubai is being incorporated intoa pilot facility for a high-pressure AWE developed by Tokuyama to
conduct research and development.
  In addition to utilizing the original technology related toelectrolyzers that we have developed over many years in the salt
electrolysis business, we will work to develop and demonstrate ahigh-pressure AWE, which enables lower prices, and will makeefforts to promote the spread of next-generation energy.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Compliance

Basic Stance and System
For Tokuyama, the word compliance has a broad meaning,
including not only complying with laws and internal rules but
also behaving sensibly in a way that conforms with corporate
ethics to meet social expectations. To communicate andspread awareness of compliance throughout the Group, theCompany distributes a leaflet that includes the TokuyamaGroup Code of Conduct to all Group officers and employees.
In addition, we conduct regular educational activities oncompliance through collective education, e-learning, andinformation distribution. Furthermore, we also conductengagement through regular meetings with management andpersonnel in charge of compliance at Group companies.

Whistle-blowing System
A whistle-blowing helpline has been established to enable
safe, anonymous reporting and consultations on complianceviolations involving the Tokuyama Group (including potential
violations) without fear of retaliation. Reporting andconsultations can be carried out by postal mail, e-mail, or
telephone. The helpline is operated in a way that protects
whistle-blowers. Employees can use the helpline without
disclosing to the Company their name or department, and afemale attorney is available for consultations. In FY2023, weestablished a system that allows locally hired employees atoverseas Group companies to file reports in their native
language, and this entered into operation in April 2024. We
are working to expand our whistle-blowing systems not onlyin terms of compliance, but also in terms of the grievancemechanism for responding to human rights.
   The number of reports has increased due to theestablishment of these whistle-blowing systems and thepenetration of ongoing harassment prevention activities since
FY2021. Meanwhile, there were no occurrences of serious
noncompliance in FY2023.

Number of reports

FY2019FY2020

FY2021

FY2022

FY2023

29

24

34

29

44

Note: Including contact points for Harassment Desk

Including contact points for whistle-blowing system for subsidiaries (including
domestic only until FY2022, overseas as of FY2023)

Stakeholder Engagement
Stakeholder Engagement
Stakeholders
Customers
Business Partners
Employees

Key Engagement Methods• Sales activities (as needed) • Factory tours (as needed) • Exhibitions (as needed)• Business partner surveys (approximately 200 companies; once every 3 years) • Joint health and safety meetings (once per year)• Employee surveys and harassment surveys (once per year each) • In-house newsletters (4 times per year) • Intranet (as needed)• Labor-Management Council meetings (once per month) • Health and Safety Committee meetings (once per month per site covered)

Shareholders andInvestors• Financial Results Briefing (Institutional: each time a financial statement is issued) • IR seminars for individual investors• Various reports (annual securities reports, consolidated reports, corporate governance reports)

Local Communities
and Society• Security and disaster prevention • Regional dialog and event sponsorship • Regional volunteers• Subsidies for next-generation training (accepting interns, donating books, traveling classrooms)• Subsidies for the promotion of science and technology (donations)

Environment• Efforts to reduce GHG and save energy • Acceptance and appropriate processing of waste • Initiatives to address biodiversity

Evaluation by Society (Excerpt)
Category
ESG Investment
Health Management

Item• FTSE Blossom Japan Sector Relative Index• FTSE Blossom Japan Index• White 500 Health and Productivity Management Organization (Large Enterprise Category) • 2024 Health and Productivity StockDX• DX certified business operator

Work-life Balance• Platinum Kurumin Certification

Participation in Initiatives (Excerpt)
For more information on social
recognition, please visit theCompany’s website.
https://www.tokuyama.co.jp/eng/
csr/evaluation.html
United Nations Global
Compact

GX League

TCFD Consortium

TNFD ForumTOKUYAMA REPORT 2024

47

Dialogue with External Directors

Taking on the challenge of building transparent
governance while fulfilling management checks andadvisory functions
Naoki Kondo

Hiraku Ishizuka

External Director
Audit & Supervisory Committee Member

External Director
Audit & Supervisory Committee Member

External Directors’ Perspective and Evaluation of Tokuyama’s Governance
Ishizuka I joined The Sanwa Bank, Ltd. (currently MUFG Bank,Ltd.) in 1984. After serving as an executive officer of Mitsubishi
UFJ Financial Group, I went on to serve as vice president andpresident of Mitsubishi UFJ NICOS Co., Ltd., and am currently
chairman of the board. I became an External Director (Audit &Supervisory Committee Member) of Tokuyama in June 2023. My
advisory activities are focused on the adequacy of the decisionmaking process. All of Tokuyama’s directors, both internal andexternal, think sincerely about the Company’s current status andfuture, and express their opinions frankly, and I believe that theeffectiveness of governance is fully ensured.

Kondo I registered as an attorney-at-law in 2000, I served as
an Assistant Counselor in the Trade Policy Bureau of the Ministryof Economy, Trade and Industry, and I have been a partner at
Oh-Ebashi LPC & Partners since 2016. I was appointed as anExternal Director (Audit & Supervisory Committee Member) of
Tokuyama in June 2023, the same month as Director Ishizuka,
and perform my duties while keeping in mind the perspective ofshareholder interests. Tokuyama has passed on a corporate
culture of integrity since its founding, and I feel that this is directlyreflected in its current governance structure, which is transparent
and fair.

Strengths of Tokuyama’s Governance
Ishizuka In the just over a year since I was appointed as adirector of Tokuyama, I have been very impressed with thethorough prior explanation and information sharing of importantmatters to the external directors. Of course, discussions by the
Board of Directors are important, but time is limited and there is

no room for rumination. Detailed explanations from President
Yokota and the executive officers deepen my understanding ofmatters and issues, and allow me ample time to think about
them, which makes discussions at meetings of the Board of
Directors more fruitful. I believe it is worth mentioning that we arealso given the authority to audit operations.
Kondo I also highly rate the sharing of management information
and awareness of issues in Tokuyama’s governance. For example,
the Board of Directors regularly reports on the execution ofbusiness operations. Executive officers spend as much as one
hour per area explaining the current status of business execution
and issues, providing a valuable opportunity for external directors
to gain a deeper understanding of the business.

48

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Roles and Functions to Be Fulfilled by External Directors (Audit Committee Members)
Ishizuka External directors have the dual functions ofchecking and advising management, but it is not easy to fulfill
the checking function in a closed corporate culture. In thisrespect, Tokuyama has inherited a traditionally free and open
corporate culture, and it is safe to say that there are no
obstacles to the exercise of the checking and monitoring
functions. Meanwhile, as for the advisory function, since I do
not have the knowledge to provide expert advice on
Tokuyama’s technologies and businesses, my task is to
examine whether top management’s business decisions andexecutive officers’ execution of strategies and measures areappropriate with regard to important themes that will
determine Tokuyama's future, such as technology
development, overseas expansion, new investments, andtransforming the business portfolio. President Yokota and theother directors and executive officers take the opinions andrecommendations of our external directors seriously, and I
believe that the effectiveness of governance is fully ensured.

Kondo One of the characteristics of our Board of Directors thatmakes governance sufficiently effective may be the diversity of
its human resources. Members of the Board of Directors include
those who concurrently serve as both directors and executive
officers, as well as the one who concurrently serves as bothinternal director and chair of the Audit & Supervisory Committee,
and the external directors are also composed of unique individuals
with different backgrounds. Of the nine directors, four are external
directors and one is a woman, which we believe is in keepingwith our diversity philosophy.

Focusing on Achieving the Goals of Medium-Term Management Plan 2025
Ishizuka Tokuyama’s Medium-Term Management Plan 2025
includes three themes, one of which is “Practice socially
responsible management,” which includes materialities related
to human capital such as “Developing human resource” and“Promotion of diversity and career fulfillment.” I believe thatefforts to strengthen our human resources and organizational
capabilities will be the key to Tokuyama’s future. A new jobbased personnel system for managers was launched in April of
this year, but the issue is how to manage the new system andbring it to fruition in strengthening the human resource base.
As someone who was present during Tokuyama’s period oftransformation, I will closely monitor the progress of MediumTerm Management Plan 2025 and materiality.

Kondo Director Ishizuka constantly stresses the importanceof balancing risk and opportunity. I concur, and believe that inorder to achieve the various goals of Medium-Term Management
Plan 2025, it is important to determine how to face new business
opportunities based on a thorough analysis of the potential
risks. I feel that it is also an important duty as an external
director and Audit & Supervisory Committee Member to makerecommendations to the executive side on whether or not it isappropriate to take risks and how to control such risks.

Future Outlook and Issues to Be Addressed
Ishizuka One of Tokuyama’s strengths is its sincere andpositive employees. Although the issues to be addressed arepiling up, such as strengthening relationships with stakeholders
and developing market-oriented technologies, I believe that
Tokuyama will surely reach the next stage of growth if
management and Group employees work together to promote
the initiatives of Medium-Term Management Plan 2025. For thisreason, it is important for the Board of Directors, eachcommittee, and the Audit & Supervisory Committee, which has
an advanced advisory function, to work together in an organic
manner. We, the external directors, will also support Tokuyama’s
efforts aimed at sustainable growth by utilizing the knowledge
and expertise that we have accumulated over the years.

Kondo Tokuyama is continuing to transform and take onchallenges in order to realize its mission “To create a bright futurein harmony with the environment, in collaboration withcustomers, based on chemistry.” However, there are a number
of issues that need to be addressed, such as the somewhat lackof discussion on the future vision at meetings of the Board of
Directors. I look forward to working with other directors andexecutive officers to help Tokuyama grow under the strong
leadership of President Yokota.

TOKUYAMA REPORT 2024

49

Management Team

(Back row from left) Nobuko Mizumoto, Naoki Kondo, Tomohiro Inoue, Fumiaki Iwasaki, Hiraku Ishizuka, Youji Miyamoto(Front row from left) Yuzo Kawamori, Hiroshi Yokota, Hideo Sugimura

Name and Position

50

Number of Company Shares
Owned, Tenure as Director

Hiroshi Yokota

Representative Director, President & Executive Officer
In charge of Chemicals, Cement, Electronic & Advanced Materials, Auditing Office37,300 shares / 9 years

Hideo Sugimura

Representative Director, Senior Managing Executive Officer, Assistant to the President
In charge of General Affairs & Human Resources, Procurement & Logistics, Secretarial Department,
Digital Administration & Planning

8,503 shares / 7 years

Fumiaki Iwasaki

Director, Senior Managing Executive Officer, General Manager, Research & Development
Division and Life Science Business Division
In charge of Life Science, New Business, Research & Development, Environment & Safety ofKashima Factory, Center for Commercialization of Advanced Technology

2,942 shares / 4 years

Tomohiro Inoue

Director, Managing Executive Officer, General Manager, Corporate Planning Division
In charge of Corporate Planning, Corporate Social Responsibility, Eco Business, Tokuyama Factory,
Carbon Neutral Strategy

1,900 shares / 1 year

Youji Miyamoto

Director, Audit & Supervisory Committee Chair

2,600 shares / 7years

Yuzo Kawamori

External Director, Audit & Supervisory Committee Member

2,500 shares / 5 years

Nobuko Mizumoto

External Director, Audit & Supervisory Committee Member

800 shares / 3 years

Hiraku Ishizuka

External Director, Audit & Supervisory Committee Member

0 shares / 1 year

Naoki Kondo

External Director, Audit & Supervisory Committee Member

400 shares / 1 year

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Corporate Governance Structure

Number of Audit & Supervisory
Number of Directors

5 internal■ 4 externalCommittee Members■
GenderComposition

1 internal■ 4 external■
GenderComposition

4 males
1 female

8 males
1 female(As of June 26, 2024)
Reason for Appointment

Attendance
Board of Directors

Audit & Supervisory Committee

Based on his extensive experience in personnel and labor issues, traditional businesses and advanced materials
businesses, he is actively working to realize the current Medium-Term Management Plan, such as in terms of transforming
the business portfolio, carbon neutrality, and implementing CSR management.

19/19(100%)—

Based on his extensive business experience in the introduction of an information system, management of an overseas
subsidiary, reconstruction of a domestic subsidiary, and serving as general manager of corporate planning departments,
he is actively working on a wide range of business activities in general.

17/19
(89%)

—

Based on his extensive experience in the fields of R&D and manufacturing technology, he is actively engaged inpromoting new research and development and creating new businesses.

19/19(100%)—

Based on his extensive experience in overseas operations, the Recycling & Environment Promotion Department, theCement Production Department, and the Eco Business Division, he is actively involved in planning and implementing
growth strategies for the Group, such as carbon neutrality and strengthening the functions of the Tokuyama Factory.

15/15*(100%)—

With a high degree of expertise in finance and accounting gained through many years of accounting operations, he has
been supervising management as an Audit & Supervisory Board member since 2013, and as a director who is an Audit &Supervisory Committee member since 2017.
* Principal concurrent positions: Auditor, ASTOM; Auditor, Tokuyama Dental; Auditor, A&T

19/19(100%)

24/24(100%)

Possessing extensive experience and broad insight as a corporate manager in the manufacturing industry, he has beensupervising the management of the Company as an external director who is an Audit & Supervisory Committee member
since 2019.

19/19(100%)

24/24(100%)She has extensive and rich experience in the manufacturing industry, first as a researcher and then as a corporate
manager through key posts in headquarter divisions. She has been supervising management of the Company as anexternal director who has been an Audit & Supervisory Committee member since 2021.
* Principal concurrent positions: Outside Director, Okamura Corporation

19/19(100%)

24/24(100%)

Possessing extensive experience and broad insight as a corporate manager in financial institutions, he has beensupervising management of the Company as an external director who has been an Audit & Supervisory Committee
member since 2023.
* Principal concurrent positions: Representative Director & Chairman, Mitsubishi UFJ NICOS Co., Ltd.

14/15*(93%)

18/18*(100%)

Based on his specialist perspective and rich experience as a lawyer, he has been supervising the management of theCompany as an external director who is an Audit & Supervisory Committee member since 2023.
* Principal concurrent positions: Partner, Oh-Ebashi LPC & Partners
Outside Director (Audit & Supervisory Committee Member), ibis inc.
Outside Auditor, A&D HOLON Holdings Company, Limited

15/15*(100%)

18/18*(100%)* Attendance after appointment and assumption of office at the Ordinary General Meeting of Shareholders for the fiscal year ended March 31, 2023.

TOKUYAMA REPORT 2024

51

Corporate Governance

Basic StanceAmid the major transformations taking place throughout
society, Tokuyama, in line with the business environment
we face today, has defined the corporate Mission as “To
create a bright future in harmony with the environment, in
collaboration with customers, based on chemistry.” Thisdefinition incorporates the Company’s desire to contributeto a sustainable society by pursuing business in harmony
with the environment and working to create the future
together with customers. This is only possible with thetrust and support of shareholders, customers, suppliers,
employees, local communities, and all other stakeholders,which the Company believes will fuel sustainable growthand greater corporate value over the medium to long term.
   Corporate governance is an important management
issue in order to achieve this, and we recognize that it isvital to improve and constantly enhance the function of
governance itself by responding to the various
expectations, requirements, and requests of our
stakeholders.
   We newly established the Corporate Governance
Policy in 2024, and have explicitly stated our philosophy
on governance, such as that we will respect the rights andequality of shareholders, cooperate effectively with all
stakeholders, achieve the disclosure of information andtransparency, maintain the independence of the Board of
Directors and improve the Board’s oversight, accelerate
decision-making, clarify responsibility, and strive forconstructive dialog with shareholders.

Corporate Governance Reporthttps://www.tokuyama.co.jp/eng/company/
pdf/20240626_CGHoukokusyo_en.pdf

Steps to Strengthen Our Governance Structure• Evaluation of effectiveness of Boardof Directors conducted by externalorganization (conducted annually
after that date)• Introduction of performance-linked
share-based remuneration plan

FY2018•A nnouncement of Tokuyama’s
New Vision•D ecision to abolish anti-takeovermeasures

FY2019FY2020• Revision to “Basic Policy on
Establishing the Internal Control
System” (revision to a policy focusedon Group management)

FY2021

FY2022

FY2023

FY2024• Enhance policies, such as
establishing the Tokuyama Group
Sustainability Principles and therevision of the Tokuyama Group
Code of Conduct•O ne external director added
(to strengthen diversity of Board of
Directors)• Revision of criteria for determining
independence of external directors• Establishment of Corporate
Governance Policy

Corporate Governance Structure
Shareholders’ Meeting
Appoint/dismiss

Nomination and Remuneration
Advisory Committee

ReportBoard of Directors
Audit, etc.
ReportAppoint/dismiss

Appoint/dismiss

Audit & Supervisory
Committee

Audit

Whistle-blowing System

AssistAudit

Decide/supervise

Cooperate

Audit & Supervisory
Committee OfficeBusiness Operations
Executive
Committee
Strategy
Committee

Accounting Auditors

Helpline

ReportPresident

Helpline Committee

CSR Promotion Council
Risk Management and Compliance
Committee

Auditing Dept.
Internal audit

Business Divisions, etc.
Group Companies

52

TOKUYAMA REPORT 2024

Guidance
Support
Requests

Management
Divisions

Corporate Social
Responsibility DivisionCorporate Planning Division, etc.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Meeting Bodies on Governance and Main Content of Deliberation
Overview

Board of Directors

The Board of Directors deliberates and decides on statutory matters and important matters related to business execution, and supervises the status ofbusiness execution by directors and executive officers to whom the execution of business is delegated. The Company is oriented toward a hybrid Boardof Directors that both makes decisions on business execution and supervises the execution of business by directors and executive officers. This function
includes advising the executive management team on its resolute efforts to enhance corporate value over the medium to long term. In light of this, theBoard of Directors is chaired by an executive director or a director with executive experience. At least one-third of the Board of Directors are independent
external directors in order to enhance the effectiveness of decision-making from a broader perspective as well as the supervision of business execution.
In principle, meetings are held regularly once a month, and extraordinary meetings are held as needed.
The Board of Directors deliberated and decided on matters related to corporate accounting, such as financial statements, matters related to dividends,
important personnel and organizational matters, and important matters related to business execution, and also actively exchanged opinions on
management issues and other important topics.
•	Meetings of the Board of Directors held in FY2023: 19
Resolutions in writing: 5 times (pursuant to Article 370 of the Companies Act and Article 29 of the Company’s Articles of Incorporation)

Audit & Supervisory
Committee

The Company has chosen the format of a company with audit and supervisory committee as its institutional design under the Companies Act in order tostrengthen the auditing and supervisory functions of the directors’ execution of their duties and to facilitate prompt decision-making, with the aim ofachieving open management with an emphasis on governance and customer-oriented management. The Audit & Supervisory Committee consists of
non-executive directors, and Directors who are Audit & Supervisory Committee members (hereinafter referred to as “Audit & Supervisory Committee
members”); members monitor the status of business execution through meetings of the Board of Directors and other important internal meetings, andaudit the execution of business by executive directors.
The committee conducts hearings on the status of business execution from the heads of business divisions and functional divisions, exchanges
opinions with representative directors, examines the status of operations at plants and major business offices, and communicates and exchanges
information with the auditors of subsidiaries. It also holds regular meetings with the Accounting Auditor to confirm reports on the status and results ofaudits and to exchange opinions on key audit matters (KAMs).
• Number of meetings held in FY2023: 24

Nomination andRemuneration Advisory
Committee

Based on the Company's basic philosophy on corporate governance, and in order to achieve more transparent and objective management, the Company
has established the Nomination and Remuneration Advisory Committee, whose duty is to deliberate on personnel matters and remuneration for directors(excluding Audit & Supervisory Committee Members), executive officers, and other persons treated as executives, and to report or make proposals to theBoard of Directors (In addition, the President Nomination Committee, which is separately established as a subordinate organization of the Nomination andRemuneration Advisory Committee, is responsible for deliberations on the succession plan for the President). The Nomination and Remuneration Advisory
Committee shall consist of a majority of independent external directors, and the term of office of its members shall be one year.
In the area of human resources, the main topics of discussion included the selection of candidates for directors, the selection of representative
directors, the selection of executive officers, the determination of their responsibilities, and the skill matrix for directors. In the area of remuneration, themain topics of discussion included the introduction of a bonus system for directors, the calculation of monetary remuneration by the president, andstrengthening the relationship between remuneration and materiality for the next and subsequent years.
•	Number of meetings held in FY2023 Nomination and Remuneration Advisory Committee: 9, President Nomination Committee: 1)

Executive Committee

The Executive Committee is a decision-making body whose members are selected by the president and executive officer (hereinafter referred to as “thepresident”) from among the Company’s other executive officers. In principle, the committee meets two times each month. Based on the approval-related
rules determined by the Board of Directors, the Executive Committee deliberates on and makes decisions on strategies and other important matters.

Strategy Committee

The Strategy Committee is an advisory body to the president made up of members are selected by the president from among the Company’s otherexecutive officers. The committee meets once a month and serves , and in addition to deliberating on the direction of business execution, it works to
confirm the allocation of management resources with the aim of evaluating conditions relating to business execution in respect to important mattersrequiring approval. It also sets the direction of policies related to business execution with regard to specific projects.

CSR Promotion Council

Chaired by the president, the CSR Promotion Council includes all executive officers. The committee sets CSR (sustainability) policies and goals, while alsoenabling initiatives to achieve those goals. In addition to sustainability issues, important internal control issues are also discussed by the committee.

Risk Management andCompliance Committee

Tokuyama’s Risk Management and Compliance Committee, chaired by the director in charge of corporate social responsibility, has been establishedunder the CSR Promotion Council to handle risk management and compliance.

Expert Committees

Separately from the Risk Management and Compliance Committee, under the CSR Promotion Council, Tokuyama operates various committees (Financial
Reporting Committee, Fair Trade and Competition Committee, Security Trade Committee, Information Security Committee, Environment Committee, Safety
Committee, and Product Safety and Quality Assurance Committee, and Sustainability Committee) focused on risk management and compliance in criticaland specialized areas.

Helpline Committee

The Helpline Committee is responsible for the administration of Tokuyama’s helpline (whistle-blowing) system for the internal reporting of legally questionableactions and behavior by Group executives and employees.

Analysis and Evaluation of Overall Effectiveness of the Board of Directors
We regard corporate governance as an important management
issue, and as part of this, we conduct an evaluation of theeffectiveness of the Board of Directors every year.
   In the FY2023, the Company engaged an externalorganization to conduct a questionnaire survey and interviews of
all the directors, and analyzed their responses. The results were
submitted to the Board of Directors for review and discussion.
   The results of the analysis and evaluation revealed thatthe effectiveness of the Board of Directors is generally being
ensured. In particular, the culture of respecting free andvigorous discussion is fostered and maintained, andinformation is shared through various channels, among otherstrengths. In addition, it was confirmed that sufficient andeffective efforts were made to substantiate the businessexecution reports and to provide opportunities for focused
discussion of management issues, which were issues
identified in previous years. Meanwhile, issues emerged interms of the ongoing improvement of the Board of Directors’
operations and its contribution to the realization of the Vision
set forth in Medium-Term Management Plan 2025.
   The Company’s Board of Directors will further strengthen
its supervisory function by encouraging active involvement,
especially by external directors, in the continuous improvementof operations. In relation to Medium-Term Management Plan
2025, the Board of Directors will also deepen discussions withthe executive management team in order to function as acatalyst for the realization of our Vision.

Evaluation Process
Determine assessment
items based on
the issues and responses ofthe previous year

Conduct surveys, holdinterviews and discussions

Identify issues based on
evaluations by externalorganizations

Implement response
measures and improvement
measuresTOKUYAMA REPORT 2024

53

Corporate Governance

Skills Matrix in the Board of Directors
areas in which it is expected that directors will contribute areindicated below. By ensuring an overall balance of skills
among the Board of Directors and ensuring the board iscomprised of diverse members, the Company aims to further
bolster the effectiveness of governance.

In order for the Board of Directors to hold effective discussions
and properly perform the required supervisory functions overdecision-making and business execution in consideration of
the vision, management policies, and business development
pursued by the Company, important skills identified from the
SkillsDefinition of skill and reason for selection

Management planning andstrategy

The Company considers that having one or more directors with extensive management experience and broad insights in this area is indispensable
when determining management plans and strategic policies, including portfolio management, in order for the Company to achieve sustainable growth.

Sales and marketing

Based on the value of “Commitment to customer satisfaction as a profit source,” the Company considers that having one or more directors withextensive experience and broad insights in this area is necessary for marketing, building businesses and creating profits based on an accurate
understanding of the business environment.

R&D, production technology andengineering

As a comprehensive chemical manufacturer, the Company considers that having a director with a track record of promoting various innovations andextensive experience and broad insights in R&D, production technology and engineering is necessary in order to create new business opportunities
based on proprietary technologies.

Finance and accounting

The Company considers that, both for accurate financial reporting and the formulation of a financial strategy that facilitates both investment forsustainable growth and shareholder returns while building a strong financial foundation, having one or more directors with extensive experience andbroad insights in this area is necessary.

Governance,
Risk Management

The Company considers that the establishment of an appropriate governance system is the foundation for all corporate activities and that having one
or more directors with extensive experience and broad insights in areas such as corporate governance, risk management, legal affairs and complianceis necessary in order to improve the effectiveness of management and supervision by the Board of Directors.

Sustainability

In order to contribute to solving various social issues through its business and to be a company that is both trusted and needed by society, and giventhat this requires expertise from a sustainability management perspective pertaining to the environment and society, the Company considers thathaving one or more directors with extensive experience and broad insights in this area is necessary.

Human Capital

The Company recognizes human resources as being the most critically important management capital for sustainable growth, and considers thathaving one or more directors with extensive experience and broad insights in this area is necessary in order to build a human resources strategy that is
linked to our business strategy and to be a company where diverse human resources can harness their respective skills to the maximum extent.

DX

The Company considers that, since the promotion of fundamental business reforms through DX, rather than merely seeking to improve operational
efficiency and productivity through IT, is indispensable for the Company’s continued sustainable growth and medium- to long-term improvement ofcorporate value, having one or more directors with extensive experience and broad insights in this area is necessary.

Global Business

Given that the acceleration of overseas business is essential for transforming the business portfolio, which is part of the Company’s medium- tolong-term strategy, the Company considers that having a director with extensive experience and broad insights in global business, such as overseas
management experience and business development, is necessary.

Management
Planning,
Strategy

Sales,
Marketing

R&D,
Production
Technology,
Engineering

Finance,
Accounting

Governance,
Risk
Sustainability
Management

Human
CapitalDX

GlobalBusiness

Hiroshi Yokota (Representative Director,
President and Executive Officer)
Hideo Sugimura (Representative Director,
Senior Managing Executive Officer)
Internal

Fumiaki Iwasaki (Director, Senior
Managing Executive Officer)
Tomohiro Inoue (Director, Managing
Executive Officer)
Youji Miyamoto (Director, Audit &Supervisory Committee Chair)
Yuzo Kawamori (External Director, Audit& Supervisory Committee Member)

External

Nobuko Mizumoto (External Director,
Audit & Supervisory Committee Member)
Hiraku Ishizuka (External Director, Audit& Supervisory Committee Member)
Naoki Kondo (External Director, Audit &Supervisory Committee Member)

Note: Skills, career, and expertise considered necessary for the Board of Directors are reviewed in accordance with changes in the business environment and management
policies. The skill matrix indicates the fields that each respective Director is expected to contribute to in the supervision of management, but does not represent all skills,
career, and expertise that each Director possesses.

Response to Chief Executive Officer Succession Plan
The Company has established a President Nomination Committee
within the Nomination and Remuneration Advisory Committee,
which has the function of formulating and implementing a
succession plan for the Chief Executive Officer (President andExecutive Officer), deliberating on selection and dismissal, andmaking reports and recommendations to the Nomination andRemuneration Advisory Committee. The President Nomination
Committee is chaired by an independent external director, with
the President as the only internal director and a majority of themembers being independent external directors.
54

TOKUYAMA REPORT 2024   The Board of Directors deliberates on and appropriately
supervises the activities of the President Nomination
Committee with respect to regular reports through theNomination and Remuneration Advisory Committee to ensurethat the Company’s management philosophy (Vision) andmanagement strategy are taken into account and thatsufficient time and resources are being systematicallyallocated to the development of potential successors.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Director Training
Newly appointed directors and newly appointed executive
officers, who will be candidates for directors, are required toparticipate in external executive training. The content of the
training program can be selected based on the experienceand knowledge of the individual, but with corporate
governance in mind, the required content includes legal affairs
and corporate governance as well as accounting and finance.
The Company also allows participants to attend externalseminars related to their corporate responsibilities on theirown. External directors are given the opportunity to visit
factories and to learn about the Company when they takeoffice, so that they can understand the current condition of
the Company’s businesses and operations. Finally, theCompany also holds study sessions, when needed, in order
for all directors to gain a better understanding of domestic
and international economic conditions, legal revisions, andnew systems.

Director Remuneration
For details of the Company’s policy for determining thecontent of remuneration, etc. of individual directors(excluding Audit & Supervisory Committee Members),
please refer to the Corporate Governance Policy [Appendix
4] “Policy on Determining Director Remuneration on an
Individual Basis (excluding those who serve on the Audit
and Supervisory Committee).” The amount of remuneration
is calculated in accordance with this policy and isdetermined by the Board of Directors after deliberation by
the Nomination and Remuneration Advisory Committee.

Method for Determining Remuneration(1) The final annual amount of basic remuneration for each individual iscalculated and determined by the Representative Director, President andExecutive Officer, having received authorization to do so from the Board of
Directors, based on a standard amount predetermined for each position.
(2) Bonuses are determined by the Representative Director, President andExecutive Officer, having received authorization to do so from the Board of
Directors, based on performance for the target fiscal year after first
determining the payment percentage in accordance with the standard
bonus amounts for each position, the performance targets for the target
fiscal year, and the achievement level against those targets.
(3) For performance-linked share-based remuneration, the number of shares
granted is calculated by multiplying the performance-linked coefficient(ranging from 0% to 150%) set according to the degree of target
achievement.

Basic Policy
The remuneration plan for the Company’s directors is based on the following
perspectives:(a) Ensures that directors contribute to sustainable growth for corporate
performance and corporate value based on the Tokuyama Vision(b) Provides a level of remuneration that secures and retains human resourcesthat can support the Company’s management(c) Considers the performance of the Company(d) Employs a highly transparent, objective remuneration decision making
process

Amount of Remuneration Paid to Directors and Audit &Supervisory Committee Members (FY2023)

Overview of the Remuneration System
The Company’s remuneration for directors consists of basic remuneration andbonuses,1 which are monetary remuneration, and performance-linked
share-based remuneration,2 which is non-monetary remuneration, and themethod of determining each has been prescribed.

1. Recipients are executive directors
2. Recipients are directors excluding directors who are Audit & Supervisory Committee
Members, non-executive directors, external directors and non-residents of Japan

Category

Number ofPeopleRemuneration
Amount5¥155 million

1¥29 million

6¥56 million

Directors (excluding directors who are Audit& Supervisory Committee members)
Audit & Supervisory Committee members(excluding external directors)
External Director

Note: 1. The above includes three directors who retired during the current fiscal year.
2. The above includes ¥8 million of performance-linked share-based compensation
expense recorded during the current fiscal year.
3. The figures above do not include the employee salary portion for directors also
serving in employee positions.

Corporate Governance Policy
https://www.tokuyama.co.jp/eng/csr/pdf/
corporate_governance_policy_e.pdf

Policy on Holding Listed Shares for Purposes Other Than Pure Investment
The Company holds shares of publicly listed companies
for strategic reasons in accordance with the requirements
for business activities as part of the overall management
strategy. This includes the need to maintain and bolstertransactions, raise funds, and consistently procure raw
materials. As far as the strategic holding of shares inpublicly listed companies is concerned, the Company will
limit holdings to the minimum level possible, taking into
consideration the need to ensure efficient corporate
management. In addition, the Board of Directors takes
steps to verify the economic rationality of holding shares inpublicly listed companies by comparing capital costs thatfactor in associated risks with accrued benefits, while
confirming the propriety of holdings based on a future
outlook each year. The Company held shares in a total of
20 listed companies as of March 31, 2024. Efforts will bemade to reduce the number of shares by around 10
companies in FY2024. The Company exercises voting
rights in shares based on the contribution to corporate
value for both the Company and the investment target
company.

TOKUYAMA REPORT 2024

55

Risk Management

Strengthening Our Risk Management System
Tokuyama has established the Risk Management andCompliance Committee under the CSR Promotion Council aspart of our Company-wide risk management system, as
outlined on p. 38: Sustainability-related Meeting Bodies. The
Risk Management and Compliance Committee considers
events and issues that have recently emerged or that haveundergone a change in the degree of impact, by monitoringsocial conditions and coordinating with other committees. This
committee then assesses whether or not these are real risks
and meets with expert committees to develop a response.
   The Risk Management and Compliance Committee
performs group-wide enterprise risk management by making
visible and mapping risk levels both quantitatively andqualitatively from several perspectives: impact (monetary loss,
decrease in market share, and scale of impact, etc.); occurrence
frequency and probability; and Company’s vulnerability.

   The expert committees examine and determine mitigation
policies for the risks they are responsible for (including risk
reduction, avoidance, transfer, and retention). Based on thepolicies that are developed, the Group plans and implement
ways to manage risks and also conducts periodic reviews tocheck on the performance of the risk management system.
   For instance, we are working to mitigate compliance risk
by setting up management systems for understanding thelaws and regulations that cover business execution. As well,
we are tracking trends in amendments to those laws andregulations in Japan and overseas. The Risk Management
and Compliance Committee also discusses the establishmentof systems and business continuity plans in the event of acrisis involving business continuity, such as a catastrophe.

Process of Identifying Significant Risks
Board of Directors
Executive Committee

President

CSR Promotion Council
Risk Management and Compliance Committee
Identification of risks: Consideration of events and factors
Analysis of risks: Analysis of importanceClassification of risks: Determination of expert committees in charge

Expert Committees
Response to risks: Implementation of policies and measures
Evaluation of risk responses: Review of measures

Direction of risk responses: Management review of significant risks

Business Divisions, Group Companies/
Management Divisions

Market risks

Serious productdefects or quality risks

Natural disasters

Country risks

Business and human rights

Accidents or breakdowns

Business risks

Financial risks

Manufacturing risks

Serious environmental risks

Human resource risks

Definition of Scale of Damage and Impact

Globaldecarbonization risks

Large

Damage that threatens the survival of the company, as well as
substantial damage such as loss of assets

Moderate

Significant decrease of profits, or minor loss of assets

MinimalLittle impact on corporate profits and assets

Definition of Occurrence Frequency and Probability
Information security
risks
Legal andcompliance risksHigh

Occurs more than once a year; will almost certainly occur in thenear future

ModerateOccurs several times a decade

Low

Occurs once every decade or longer

Definition of Vulnerability
Pandemic disease

Small

Scale of damage/impact

Large

Mapping of Significant Enterprise Risks

High

Mitigation measures have not been implemented or are completely
inadequate

Moderate

Some measures have been implemented, but they are still insufficient

Low

Low

56

Occurrence frequency and probability

TOKUYAMA REPORT 2024High

Effective measures have been implemented and a management
cycle is in place

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

List of Significant Risks (FY2024)
Hazard risk (external environment risk)

Risks posed by the external environment and potential events

Moderate category
Natural disasters
Accidents or breakdowns

Minimal category

Relevant committee

Earthquake, tsunami, weather-related disaster, abnormal weather event (typhoon, storm surge, heavy
rains, etc.)
Fire, explosion, chemical leak, equipment or device damage or failure, utility supply interruption,
accident with aircraft, ship or railway

Risk Management and Compliance
Committee

Pandemic disease

Widespread outbreak of COVID-19 or another endemic infectious disease

Country risks

War, conflict, terrorism incident, riot, unlawful political change, or economic crisis

Information security risks

Cyberattack, virus infection, information leaks, failure of system facilities/equipment, system failure

Safety Committee
Risk Management and Compliance
Committee
Risk Management and Compliance
Committee
Information Security Committee

Business risk (strategic risk) R isks posed by the quality and accuracy of corporate strategies that affect performance andcorporate value
Moderate category

Minimal category

Global decarbonization risks

Carbon pricing and energy costs, green process adoption measures, customer penetration of green
procurement, stakeholder assessment, extreme weather, increasingly extreme weather in the longterm, and lost opportunity of expansion into the green market

Market risks
Human resource risks
Financial risks

Changes in market needs, marketing failures or deficiencies, emergence of new competitors, productdevelopment failures or obsolescence, delays in responding to rapid technological innovations, anddelays or barriers to overseas expansion
Mass turnover, difficulty in securing human resources, workforce aging, distorted human resource pyramid, human resource development and technology transfer (including workers from overseas),failure
to adopt new work styles, and human resource mismatch due to business transitions
Funding plan or financing failure, paid capital increase, suspension of financial support, interest rate or
foreign exchange rate fluctuation risk, and stock price decline

Relevant committee
Sustainability Committee(Executive Committee)(Executive Committee)(Executive Committee)

Operational risk (business process risk) 
Risks arising from deficiencies in internal processes related to business execution, or frominadequate functions
Moderate category
Minimal category
Relevant committee
Manufacturing risks
Business risks
Serious product defects or
quality risks
Serious environmental risks

Equipment or machine stoppages or accidents due to operating errors, industrial accidents, and aging
equipment or machinery
Soaring raw material or fuel prices, failed pricing policies, declining price competitiveness, dependence
on a small number of suppliers, and dependence on a small number of customers
Quality defects, voluntary recalls, product liability accidents, deficiencies in chemical safety
management when exported, management of chemical substances contained in products, andmislabeling or counterfeit labeling
Release of hazardous pollutants, contamination of soil and groundwater, complaints from local
residents regarding noise and odors, illegal dumping and improper disposal of waste, water risks,and biodiversity

Safety Committee(Executive Committee)
Product Safety and Quality
Assurance Committee
Environment Committee

Business and human rights

Human rights violations in supply chains, boycotts, and consumer movements

Sustainability Committee

Legal and compliance risks

Non-performing loans/bad debts, intellectual property rights infringement and violation, inventioncompensation disputes, antimonopoly law violation, Unfair Competition Prevention Act violation(bribery), improper contract signing, insider trading, inadequate management of licenses and permits,misconduct involving executives or employees, ties to antisocial forces, and intimidation

Fair Trade and Competition
Committee
Risk Management and Compliance
Committee

Notes: 1. The chairperson of each committee is a director who is responsible for the relevant risks.
2. Not all risks in the Group are covered, and there may be risks that could affect business activities in addition to those listed.

Information Security Initiatives
In order to preserve information assets such as customer
information and to continue appropriate corporate operations, theCompany has established an Information Security Committee,
which deliberates on policies, plans, the identification of risks aswell as the effectiveness and appropriateness of response plans
and measures, and is proceeding with the necessary measures.
We have established an Information Security Policy that covers theentire group, and have a security risk management system inplace. The status of the system is regularly evaluated and security
risk measures are implemented in a timely and appropriatemanner. In order to maintain and improve risk levels, we regularly
conduct information security self-inspection checks, internal
audits, and e-learning programs to raise awareness.
   As laws concerning the protection of personal information
are being developed in countries (regions) around the world,and compliance with laws and regulations is required not onlyin Japan but also globally, we have established the Basic
Privacy Policy as we regard the protection of the rights andinterests of individuals throughout the Group with respect to theproper handling of personal information to be an important
issue. In our Privacy Policy, we have also reviewed the contents

related to GDPR compliance and contacts for personal
information inquiries.
   In addition, we introduced a marketing automation tool tocollect and analyze information on website visitors for the
purpose of cultivating new customers, etc. With its introduction,
we established a Cookie Policy as a statement to inform visitors
about the use of cookie information, since cookie information
can be linked to other information to identify individuals.
   Cybersecurity is becoming increasingly important year by
year. We recognize that protecting the Company’s information
assets from external attacks is necessary not only for ourcompany's operations, but also to protect the stable operationsof our customers. The entire Group is taking action in order tobe fully equipped to serve as a part of the customer’s supply
chain. This year, we also received requests from importantcustomers, and we checked each group company, including
overseas, about the possibility of an incident occurring, and weare taking steps to identify and address the issues.
   As a result of these activities, in FY2023, there were no
significant incidents involving information security or personal
information.
TOKUYAMA REPORT 2024

57

Financial and Non-Financial Highlights

Financial Analysis of FY2023
In FY2023, sales decreased from the previous year due tothe sluggish semiconductor market and the exclusion of
Excel Shanon Corporation from the scope of consolidation.
Meanwhile, operating profit increased due to domestic sales
price adjustments for cement and chemical products andimproved manufacturing costs, and profit attributable toowners of parent increased accordingly, resulting in an
improvement in ROE.
   In FY2024, we anticipate that the semiconductor
market will enter a recovery phase, and we expect increased
revenue and improved earnings, based on factors such as

the ongoing improvement in manufacturing costs. In
addition, we expect an increase in expenses associated withcapital investment and research and development expenses
in order to achieve the goals of Medium-Term Management
Plan 2025.
   For dividends in FY2024 and beyond, we will target a
dividend on equity (DOE) ratio of 3% and a payout ratio of
30% or more. In FY2023, we increased the annual dividendby ¥10 per share compared to the previous year. In FY2024
as well, we plan to increase the annual dividend by ¥20 per
share compared to the previous year.

Financial Highlights
Net Sales / Operating Profit / Operating Margin

Net Sales / Operating Profit / Operating Margin(Billions of yen)

(%)
16

400

300

307.1

302.0

299.1

13.4

12.9

351.7

324.6

308.0

316.0
10.9

302.4

10.8

341.9
12

293.8
10.2
8.4

200
6.2

8

7.1

7.5

4.1

4

100
18.7

0

2014

41.2

38.5

21.9
2015

2016

2017

35.2
2018

34.2

30.9

2019

2020

24.5
2021

25.6

14.3
2022

2023

0
2024
(Forecast)

Net sales (left)
Operating profit (left)
Operating margin (right)* From FY2021, net sales are based on application of Accounting Standard for Revenue Recognition, etc.

(FY)

Profit Attributable to Owners of Parent / ROE

Profit Attributable to Owners of Parent / ROE(Billions of yen)

(%)
52.1

60

60

58.5

40

40

34.2
19.6

20
0

(65.3)

24.6

19.9

15.6

(100.5)

28.0

24.5
13.4

12.4

13.2

9.3 4.1

20

17.7
7.4

0

(20)

(20)
(33.3)

(40)

(40)
(60)

(60)
(80)

(80)
(94.0)

(100)
2014

2015

(100)
2016

Profit attributable to owners of parent (left)

2017

2018

2019

2020

2021

2022

2023

ROE (right)

2024(Forecast)

(FY)

2024
(Forecast)(FY)

Capital Expenditures / Depreciation and Amortization /R&D Expenses

Capital Expenditures / Depreciation and Amortization / R&D Expenses(Billions of yen)
40
35.6

33.3
30

29.7
25.3

20

23.7
20.0

18.8

17.3
14.2

13.9
10

26.4

10.1

8.5

7.5

15.9
13.9

18.5
15.0
8.0

7.9

19.7
16.1
9.1

20.7

17.0
10.8

12.6

13.6

17.6
14.4

0
2014
Capital expenditures

2015

2016

Depreciation and amortization

2017

2018

2019

2020

2021

2022

2023

R&D expenses* From FY2023, the depreciation method for property, plant and equipment was changed from the declining-balance method to the straight-line method.

58

TOKUYAMA REPORT 2024

Tokuyama Value Creation

Management for Sustainable
GrowthProgress of Growth
Strategy

Value Creation Strategy

Corporate Data

Cash Flows

Cash Flows(Billions of yen)
80

61.8
40

30.7

40.5

52.3

38.5

30.0

55.8

43.3

20.0

13.4

5.1

0
(10.0) (11.9)(40)(25.5)

30.1

25.9(12.6)(16.1)(21.1)(20.5) (18.3)(11.8)(19.2) (22.5)(37.6)(33.7)(33.7)(30.4)(46.5)

2021

2022

2023

(80)
(101.2)

(120)
2014

2015

Cash flows from operating activities

2016

2017

2018

Cash flows from investing activities

2019

2020

Cash flows from financing activities

2024(Forecast)(FY)Interest-Bearing Debt and Debt/Equity Ratio

Interest-Bearing Debt and Debt/Equity Ratio(Billions of yen)
300

(Times)
5.0

283.1

4.74
244.1

4.0
213.9

200

3.0
139.9

100

1.74

142.4

128.9

116.3

1.11

109.2

98.4

1.68

1.0

0.84

0.69

0.62

0.49

0.50

0.42

0
2014

2015

Interest-bearing debt (left)

2016

2017

2018

2.0

105.7

2019

2020

2021

2022

2023

0
(FY)

Debt/equity ratio (right)

Total Assets / Shareholders’ Equity Ratio

Total Assets / Shareholders’ Equity Ratio(Billions of yen)

(%)

600

60

554.5

51.3
424.4

401.3

400

40.2

383.4

361.9

54.5

51.8

478.3

433.2

48.0

457.3
40

386.7

379.6

34.7
29.3

44.0

29.9

200

20
12.8

0

0
2014

Total assets (left)

2015

2016

2017

2018

2021

(%)

120

60

53.8
100
32.4

24.4

28.8

2023

(FY)

(%)
196.2

200

30
150

19.9

70.0

80.0
18.0

70.0

20

70.0

40

10

128.6
100

90.5

0

0
2020

Cash dividends per share (left)

2021

2022

Payout ratio (right)

2023

2024
(Forecast)

(FY)

2019

138.8

117.7
91.3
73.8

50

Total shareholder return

131.2

112.3

82.8

2019

2022

Total Shareholder Return (TSR)

(Yen)

70.0

2020

Shareholders’ equity ratio (right)

Cash Dividends per Share / Payout Ratio

80

2019

2020

2021

2022

2023

(FY)

TOPIX

TOKUYAMA REPORT 202459

Non-Financial Highlights
GHG Emissions (Scope 1 and 2)(Ten thousand tonnes-CO 2e)(Ten thousand tonnes/100 million yen)

800

0.4
7
25

600

10

7
27

203

8
27

11

9

10
32

186

189
0.23

180

0.24

0.23

400

13
30

15

676

491

681

464

0.2

0.18
652

469

0.3

167
0.19

717

200

13

443

617

0.1

423

0

0
2019

GHG emissions (left)

GHG emissions (left)

2020

2021

Cosolidated production subsidiaries
Waste-derived
Materials-derived
Fuels-derived
Emissions from fuels

2022

(FY)

2023

Sales primary unit (right)

Scope 2
Scope 1

Emissions from raw materials

We recognize that the mitigation of global
warming is one of the most critical issues
today and are working hard to curb
greenhouse gas (GHG) emissions. GHG
emissions are the total emissions of gases
such as CO2, CH4 and N2O; of these, CO2
emissions account for approximately 99.8% of
the volume of emissions. GHGs are generated
mainly by the combustion of fossil fuels in
captive power plants, as well as by thedecarboxylation of limestone (raw material) in
the cement manufacturing process. GHG
emissions in FY2023 were 6,320 thousand
tonnes-CO2e.

Sales primary unit (right)

Supply Chain Emissions (Scope 3)
Tokuyama has set new emission reduction
targets for Scope 3 this year in order tochallenge the achievement of carbon neutrality
across the entire supply chain. Since
categories 1, 3, and 4 account for more than
90% of Tokuyama’s Scope 3 emissions, we
aim to achieve a 10% reduction by FY2030(compared to FY2022) relative to the total
amount of these categories. The total amountfor categories 1, 3, and 4 of Scope 3 in
FY2023 was 1.77 million tonnes-CO2e.

(Ten thousand tonnes-CO 2e)
200

150

100

52

52

51

52

43

43

42

45

75

72

75

71

Nonconsolidated

Nonconsolidated

Nonconsolidated

2020

2021

50

39

50
3
3
13

0

2019

Category 1

Category 3

Non- Consolidated
consolidated production
subsidiaries
2022

69

3
3
13
Non- Consolidated
consolidated production
subsidiaries
2023

(FY)

Category 4* Scope 3 for consolidated production subsidiaries is calculated from FY2022

Energy Usage
We encourage energy conservation as a way
to mitigate global warming. Through process
improvements and equipment upgrades, etc.,
we are promoting the use of less electric
power and steam in production, and we areencouraging the further adoption of renewableenergy. In FY2023, the percentage of
renewable energy use throughout the entire
Group was approximately 3.3%.

(TJ)
80,00060,000

3,824

7,015

3,872

6,495

3,228

6,949

4,013

7,057

3,799

7,278

40,00055,55920,00055,21952,79352,35252,539

0

2,851

2019
Non-consolidated
Renewable energy

53,34350,4582,369

2020
Group companies
Non-renewable energy

2,730

2021

49,68550,81548,047

1,841

2,687

2022

2023

(FY)

Energy from waste

Effective Utilization Rate for Waste / Zero Waste Emission Rate
(%)
10.0

99.8

99.7

96.6

96.9

95

91.4

94.7
92.4

99.9

99.8

99.2

97.1

97.8
94.3

93.9
9.0

99.9

94.7

94.2

94.5
92.8

92.0

85
2019

2020

Effective utilization rate for waste (non-consolidated)
Effective utilization rate for waste (consolidated)60

TOKUYAMA REPORT 2024

2021

2022

2023

Zero waste emission rate (non-consolidated)
Zero waste emission rate (consolidated)(FY)

The effective utilization rate for waste and thezero waste emission rate remained high in
FY2023 due to efforts to reduce the volume ofwaste and comprehensive recycling efforts. As
a result of actively promoting the recycling ofwaste generated both internally and externally,
with a focus on the reuse of waste as
feedstock for cement and thermal energy
alternatives at the Tokuyama Factory, theeffective utilization rate for waste was 92.0%
and the zero waste emission rate was 97.1%.
The Tokuyama Group, including consolidated
subsidiaries, will make further efforts toachieve the targets of an effective utilization
rate for waste of 94% or higher and a zerowaste emission rate of 99% or higher.

Tokuyama Value Creation

Management for Sustainable
GrowthProgress of Growth
Strategy

Value Creation Strategy

Corporate Data

Water Consumption (Water Intake Excluding Seawater)
We are striving to conserve water
consumption (water intake excluding
seawater) with the goal of not exceeding theamount used in FY2019. For industrial waterused for cooling water and process water, wecheck the water storage capacity of the dams
we use every day, and set and manage thewater conservation rate in accordance withthe water storage rate. Water consumption in
FY2023 was 39,051 m3 thousand, an 18.5%
decrease compared to FY2019.

(Thousand m 3)
60,000

4,371

40,00020,0004,181

43,5684,347

41,467963

39,865983

40,89938,06802019
Non-consolidated

2020

2021

2022

(FY)

2023

Consolidated production subsidiaries

Number of Employees / Percentage of Women among All Employees /Percentage of Managerial Positions or Higher Held by Women(%)(People)
6,000

5,679

5,909

5,665

5,476

13.0

12.6

12.1

16

5,734
13.2

12

10.4

4,000

8.2
2,063

2,000

8

2,520

2,459

2,315

2,256

4.7

4

2.7

2.0

2.0

1.8

2.7

0

0
2019

2020

2021

2022

(FY)

2023

Number of employees (consolidated) (left)
Number of employees (non-consolidated) (left)
Percentage of women among all employees (non-consolidated) (right)
Percentage of managerial positions or higher held by women (non-consolidated) (right)
Percentage of managerial positions or higher held by women (consolidated) (right)

Tokuyama has “responding to diversity of values andensuring fairness” as one of the strategic axes in its
Human Resources Strategy, and for this reason
promotes diversity by utilizing the varied values andperspectives of every employee in corporate activities.
We have set a target of at least women with abachelor’s degree or higher accounting for 20% or
more* of new graduate hires every year, are promoting
the hiring of female employees, and have also set atarget of increasing the percentage of managerial
positions or higher held by women to at least 15% by
FY2030. The percentage of managerial positions or
higher held by women gradually increased to 8.2% in
FY2023, and we will continue our efforts to promote
diversity in order to achieve our target.
* Non-consolidated and domestic consolidated subsidiaries

Accident Frequency Rates
2.4
2.0

2.09

1.95

1.80

2.14

2.06

1.6
1.2

1.16

1.07

0.94

1.04

0.93

0.8
0.4

0.28

0.23

0.49

0.43

0.00

0
2019
Non-consolidated

2020
All industries in Japan

2021

2022

(FY)

2023

One of our safety management goals is toachieve zero accidents and lost time
injuries, and we are working to identify
and eliminate risk factors, as well as tounderstand and recognize the behavioral
characteristics of each individual in order
to eliminate unsafe behavior. However, theaccident frequency rate increased in
FY2023 due to the occurrence of two
employee lost time injuries. We willcontinue our efforts aimed at zero losttime injuries.

Chemical industry in Japan

Number of Patents Held
(Patents)
3,000

2,000
Overseas
1,510

FY2023

1,000

0
2019

2020

2021

2022

2023

Electronic & Advanced Materials*, Life Science, and Eco Business(FY)
Chemicals, Cement and Other* On April 1, 2023, the name was changed to Electronic & Advanced Materials

Japan
1,220

Toward realizing the transformation of ourbusiness portfolio, we are concentrating
R&D investment in the Electronic &Advanced Materials, Life Science and Eco
Business, which we have positioned as
growth businesses, and are acquiring andprotecting intellectual property rights forthe results of these activities in preparation
for commercialization. As a result, thenumber of patents held in these threebusinesses has increased. At the sametime, the number of patents held outsideof Japan increased with a view to global
business expansion.
TOKUYAMA REPORT 2024

61

Corporate Data (as of March 31, 2024)

Tokuyama Corporation Business Sites in Japan

Company Overview
Corporate name

Tokuyama Corporation

EstablishedFebruary 16, 1918

Industry

Chemical manufacturing

Location

Tokyo Head Office
Front Place Akihabara
7-5 Sotokanda 1-chome, Chiyoda-ku,
Tokyo 101-8618, Japan
TEL. +81-3-5207-2500
FAX. +81-3-5207-2580

Tokuyama
Factory

Tokuyama Factory (Registered Address)
1-1 Mikage-cho, Shunan-shi, Yamaguchi,
745-8648, Japan
TEL. +81-834-34-2000
FAX. +81-834-33-3790

Tokuyama
Research
Laboratory
ShunanSales Branch

No. 2 Tsukuba
Research
Laboratory

Hiroshima
BranchFukuoka
BranchKashima
Factory¥10,000 million

Capital
Number of
employees

5,734 (consolidated basis; 772 working overseas)
2,520 (non-consolidated)

Consolidated
subsidiaries

50

Tsukuba
Research
Laboratory

NagoyaSales Branch

Osaka
OfficeTokyo
Head OfficeTakamatsu
BranchCenter forCommercialization ofAdvanced Technology

Stock Information
Total number of sharesauthorized to be issued

200,000,000 common shares

Number of shares issued

72,065,859 common shares(excluding 22,468 treasury shares)

Stock exchange listing

Tokyo Stock Exchange Prime Market

Tokuyama Europe GmbH
Tokuyama Dental Deutschland GmbH

Securities code

4043

Germany

Number of shareholders

Common shares: 28,345 shareholders

Fiscal year

From April 1 to March 31

Consolidated Subsidiaries Overseas
Tokuyama America Inc.
Tokuyama Dental America Inc.

United States

Tokuyama Dental Italy S.r.l.

Italy

Tokuyama Korea Co., Ltd.
STAC Co., Ltd.

Dividend Policy

South Korea

Dividends will be paid to the shareholders stated in the final version of theregister of shareholders on March 31 and September 30. As far as the
distribution of profits is concerned, Tokuyama’s basic policy is to ensure
the continuous and stable payment of dividends to shareholders. In
carrying out this policy, we take into consideration performance trends, thedividend payout ratio, and the roadmap established under the medium- tolong-term business plan.

Shareholders by Type
3.3%

China

9.8%

Tokuyama (Shanghai) Co., Ltd.
Tokuyama Trading (Shanghai) Co., Ltd.
Tokuyama Chemicals (Zhejiang) Co., Ltd.
Shanghai Tokuyama Plastics Co., Ltd.
A&T Shanghai Co., Ltd.

36.4%

28.5%

Shareholders
by Type

New Caledonia
Taiwan22.0%■ Securities companies (26,225 thousand shares)■ Individuals/others (15,826 thousand shares)■ Non-Japanese corporations/overseas residents (20,524 thousand shares)■ Other domestic corporations (7,089 thousand shares)■ Financial institutions (2,400 thousand shares)

62

TOKUYAMA REPORT 2024

Tokuyama Nouvelle Calédonie S.A.

Formosa Tokuyama Advanced Chemicals Co., Ltd.
Taiwan Tokuyama Corporation
Tokuyama Taiwan Corporation

Singapore

Tokuyama Singapore Pte. Ltd.

Tokuyama Value Creation

Value Creation Strategy

Progress of Growth
StrategyManagement for Sustainable
GrowthCorporate Data

Consolidated Subsidiaries
Electronic & Advanced Materials

Chemicals

Other

Tokuyama Chemicals (Zhejiang) Co., Ltd.1

Shin Dai-ichi Vinyl Corporation1,2

Tokuyama (Shanghai) Co., Ltd.

Manufacture and sale of fumed silica, high-purity
chlorosilane, high-purity chemicals for electronics
manufacturing

Manufacture and sale of PVC resin

Management company to provide services for othergroup companies in China

Formosa Tokuyama Advanced Chemicals
Co., Ltd.1
Manufacture and sale of high-purity IPA forelectronics manufacturing

Tokuyama Soda Trading Co., Ltd.
Stocking and sale of soda ash and calcium chloride

Sun Arrow Kasei Co., Ltd.
Manufacture and sale of PVC resin compounds

STAC Co., Ltd.
Manufacture and sale of high-purity IPA forelectronics manufacturing

Tokuyama-Dowa Power Materials Co., Ltd.
Manufacture and sale of aluminum nitride substrates

Life Science

Tokuyama Nouvelle Calédonie S.A.
Manufacture and sale of cement

Tokuyama MTech Corporation
Manufacture and sale of building materials andchemical products

Tokuyama Art Block LABO Co., Ltd.

Tokuyama Dental Corporation

Manufacture and sale of ready-mixed concrete andconcrete products

Kawasaki Tokuyama Ready Mixed
Concrete Co., Ltd.

Sale of dental materials and equipment

Manufacture and sale of ready-mixed concrete

Tokuyama Dental Deutschland GmbH

Chugoku Ready Mixed Concrete Co., Ltd.

Sale of dental materials and equipment

Manufacture and sale of ready-mixed concrete

Tokuyama Dental Italy S.r.l.

Hiroshima Tokuyama Ready Mixed
Concrete Co., Ltd.

Manufacture and sale of diagnostic reagents,
analyzers and systems

A&T Shanghai Co., Ltd.
Sale of diagnostic reagents, analyzers and systems

ASM Inc.
Development, manufacture and sale of polyrotaxanerelated products
One other company

Eco Business
ASTOM Corporation
Manufacture, sale and maintenance of ion-exchange
membranes and related equipment

Tokuyama Chiyoda Gypsum Co., Ltd.
Collection of waste gypsum board, manufacture andsale of gypsum dihydrate, operation of waste
gypsum board recycling businessTokuyama Singapore Pte. Ltd.
Manufacture and sale of high-purity chemicals forelectronics manufacturing
Sale of Tokuyama Group products

Tokuyama America Inc.
Tokuyama Europe GmbHTokyo Tokuyama Concrete Co., Ltd.

A&T Corporation

Sale of Tokuyama Group products

Sale of Tokuyama Group products

Manufacture and sale of microporous film

Sale of dental materials and equipment

Tokuyama Korea Co., Ltd.

Stocking and sale of cement and ready-mixed
concrete

Manufacture and sale of interlocking blocks

Tokuyama Dental America Inc.

Tokuyama Taiwan Corporation

Tokuyama Tsusho Trading Co., Ltd.

Shanghai Tokuyama Plastics Co., Ltd.1

Manufacture and sale of dental materials andequipment

Sale of Tokuyama Group products

Marketing and R&D of growth businesses

CementTaiwan Tokuyama Corporation
Manufacture and sale of high-purity chemicals forelectronics manufacturing

Tokuyama Trading (Shanghai) Co., Ltd.

Manufacture and sale of ready-mixed concrete

Seibu Tokuyama Ready Mixed ConcreteCo., Ltd.
Manufacture and sale of ready-mixed concrete

Shirokawa Co., Ltd.
Manufacture and sale of ready-mixed concrete

Kagawa Tokuyama Co., Ltd.
Sale of cement and construction materials,
manufacture and sale of ready-mixed concrete

Kyushu Tokuyama Ready Mixed ConcreteCo., Ltd.

Sale of Tokuyama Group products

Shunan System Sangyo Co., Ltd.
Civil engineering, construction work and planning;on-site contracted factory work; stocking and sale ofconstruction materials

Shunan Swimming Club Co., Ltd.
Operation of health promotion facilities including
swimming and fitness clubs

Tokuyama Kairiku Unso K.K.
Shipping, transportation and warehousing

Kyoueisekiyu Corporation
Petroleum-related businessYamaguchi Kisen Corporation
Marine transportation

Shunan Bulk Terminal Co., Ltd.
Warehouse operations for bulk cargoes of coal, etc.

Tomitec Co., Ltd.
Manufacture of household dehumidifiers and moldingof synthetic resin productsSuper Nano Design Co., Ltd.
Design, manufacture and sale of nanomaterials

Tokuyama You You Farm Co., Ltd.
Cultivation of leaf lettuce

Manufacture and sale of ready-mixed concrete

Toyomi Co., Ltd.
Manufacture and sale of ready-mixed concrete

Notsuharu Co., Ltd.
Manufacture and sale of ready-mixed concrete

FL Tokuyama Corporation
Sale of plaster sheets and items made fromplaster sheets

1. Specified subsidiary
2. Absorbed by Tokuyama Corporation on April 1, 2024
Note: Excel Shanon Corporation became an equity-method
affiliate on July 3, 2023.
Shunan Kairiku Unso Limited was absorbed by
Tokuyama Kairiku Unso K.K. on October 1, 2023
Tokuyama METEL Corporation was excluded fromthe scope of consolidated subsidiaries on December
28, 2023.

TOKUYAMA REPORT 2024

63

Front Place Akihabara
7-5 Sotokanda 1-chome, Chiyoda-ku, Tokyo 101-8618, Japan
Corporate Social Responsibility Divisionhttps://www.tokuyama.co.jp/eng/