Integrated Report 2020
2020.1.1-2020.12.31

Materials that spread joy
To everything that makes us smile
To industries that enrich our lives
To a future that is kind to us and to our planet
You may not know it, but we’ve already met

INTRODUCTION

2Tokai Carbon is Helping out behind the Scenes

4

Tokai Carbon’s Seven Businesses

6

At a Glance

Tokai Carbon Value Creation

8

Message from the President

14

History of Tokai Carbon Value Creation

16

Tokai Carbon’s Value Creation Model

182020 Performance Data

Strategy for Value Creation20	2020 Highlights
22

Solid SiC Products to Support the Evolution of Semiconductors

Business Overview

Graphite Electrodes24		Carbon Black26		

Fine Carbon

28		

Smelting and Lining

30		

Industrial Furnaces and Related Products

31		

Other Businesses (Friction Materials, Anode Materials)

Foundation that Supports Corporate Value

32

ESG Management

34

Environmental Management

36

Respect for Human Rights

37

Human Resources Development38

Occupational Safety and Health

39

Reliable Product Supply / CSR Procurement40

Corporate Governance

Financial Section & Corporate Data

46

Financial Strategy

48

Long-Term Earnings Summary (2010–2020)

50

Financial Statements

57

Company Overview

58

Group Companies

60

Stock Information

The Tokai Carbon Group pursues medium- to long-term business strategies to realize its long-term vision of being “A Global
Carbon Company Contributing to a Better Society.” This Integrated Report presents our business results and outlook, andoverviews of individual businesses, from both financial and non-financial perspectives.
Our website presents the latest information and details on our businesses and on environmental and social matters. We invite
you to visit it to learn more about Tokai Carbon.
WEB https://www.tokaicarbon.co.jp/en/
Issue Date August 2021
Reporting Scope	This report applies to Tokai Carbon Co., Ltd. and affiliated companies. The scope of applicability for reports with alimited reporting scope shall be indicated separately.
Reporting Period Excluding content with specific dates, this report reflects activities between January 1, 2020 and December 31, 2020.

TOKAI CARBON INTEGRATED REPORT 2020

1

Tokai Carbon is Helping out
behind the Scenes

1
Steel frames of buildings
and bridges
Most steel beams are recycled in electric arc
furnaces using graphite electrodes.
Graphite Electrodes

2Black ink
Carbon black is used pigment ink fordaily newspapers and coloring plastics.
Carbon Black

3
Aviation engine parts
Fine carbon products are used in the
manufacturing process of engine parts.
Fine Carbon

2

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

4
Building glass
The surface is processed in industrial furnaces using
EREMA heating elements.
Industrial Furnaces and Related Products

5
Brakes/Clutches
Our components are widely used in motorcycles,
agricultural machinery, construction equipment,
and industrial robots.
Friction Materials

6
Electric vehicle battery
We are helping to boost lithium-ion battery
performance to popularize electric vehicles.
Anode Materials

7
Vehicles and wheels
We support the growing demand of aluminumfor lighter weight products by providing cathodes
for its smelter.
Smelting and Lining

TOKAI CARBON INTEGRATED REPORT 20203

Tokai Carbon’s Seven Businesses
Tokai Carbon operates a portfolio of seven businesses lead by the two core businesses ofgraphite electrodes and carbon black.

1 Graphite Electrodes

Graphite electrodes are indispensable to the process of melting
scrap steel in an electric arc furnace and recycling it into steel
beams and other products. The graphite electrodes work aselectrical conductors in such furnaces. We supply high-quality
electrodes to the electric arc furnace, which has significantly
lower CO2 emissions compared to the blast furnace steel
making method. Tokai Carbon is helping to curb climatechange and recycle resources behind the scenes.
Electric arc furnaces emit 1/4 the CO2 compared toblast furnaces
P.22

2 Carbon Black

Carbon black is used as a reinforcing agent to enhance
the strength and extend the life of tires. It is made fromresidual oil and accounts for nearly 30% of the weight oftires. It is also widely used in black pigment inks, in resins,
and as a wire coating material.
When you see black items, it’s carbon black.
P.24

3 Fine Carbon

With its superior heat resistance and electrical conductivity
characteristics, fine carbon is used in a wide range ofindustries including semiconductors, smartphones andsatellites. Tokai Carbon Group’s lineup features a wide
range of world class products, including glassy carbon andsolid SiC products, which we pioneered.
From semiconductors to solar panels for satellites
P.26

4

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Furnaces
4 Industrial
and Related ProductsThis business supplies custom-made furnaces for heating
ceramics, glass, metals, powders, secondary battery materials,
and electronic components. We also develop and manufacture
the heating elements (EREMA brand) to take care of the overall
technology and development needs of industrial furnaces.
Responsible for heat treatment processes
in a wide range of industries
P.30

5 Friction Materials

Friction materials play an important role in brake/
clutch mechanisms that support power control in various
applications such as motorcycles, agricultural and construction
machinery, industrial robots, and wind power systems. Our
highly regarded material design technology is based on ourthorough knowledge of carbon (the products’ raw material).
Contributing to every field from agriculture andconstruction to industrial robots
P.31

6 Anode Materials

Lithium-ion batteries for electric vehicles require the highest
performance in quality and safety. The carbon anode material
we produce determines the performance of the lithium-ion
batteries. We contribute to batteries that are compact in size,
large in capacity, and longer in service life.
Impacting the driving performance of electric vehicles
P.31

7 Smelting and Lining

We are a top-tier supplier of cathodes used in aluminum smelters,
furnace linings for blast furnaces, and carbon electrodes used in
smelting silicon metal and other metals. Our high-quality cathodeblocks support the rising demand for aluminum for lighter
weight applications.
Supporting demand for aluminum forlighter weight applications
P.28
TOKAI CARBON INTEGRATED REPORT 20205

At a Glance
Sales by Division

Global Business Organization(FY2020)

Japan

Friction Materials

9 companies
22 locations

Anode Materials

3.2% 2.1%

Industrial Furnaces
and Related Products

6.9%

GraphiteElectrodes
Smelting and
Lining

18.8%

18.1%

Fine Carbon

15.8%

FY2020Carbon Black

Europe6 companies
8 locations

35.1%¥201.5 billion

Building a balanced
business portfolio
The Group has long relied on two businesses, Graphite Electrodes
and Carbon Black. Seeking a more stable earnings structure,Asia

8 companies
8 locations

Sales by Region (FY2020)
Other Regions

10.6%

Europe11.7%

we expanded our Fine Carbon business, which supplies the
fast-growing semiconductor industry. Meanwhile, the Group has also
set its sights on the aluminum market, which is projected to overtake
the growth of the steel market, and acquired its smelting and lining
business through M&A in 2019. As a result, our revenue streams are
now diversified. Our three-year medium-term management plan
“T-2023” targeting 2023 aims to strengthen the revenue base ofeach business and further optimize our business portfolio.

6

TOKAI CARBON INTEGRATED REPORT 2020

United Statesof America

26.5%

Asia

26.7%

Japan

24.6%

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Sales by Division (Target)
Friction Materials Anode Materials

2.7% 1.8%

Industrial Furnaces
and Related Products

6.2%

GraphiteElectrodes

25.8%

Smelting and
LiningNorth America

6 companies
6 locations

Workforce Structure by Region

19.1%

Fine Carbon

13.1%

FY2023 Target

Carbon Black

31.4%¥320.0 billion(FY2020)

Asia

21%

Japan

EuropeNorth
America

32.5%

31%

15.4%

TOKAI CARBON INTEGRATED REPORT 20207

Message from the President

Sustainable cash inflow throughportfolio diversity

Company recorded losses under such a radical environmental

With the COVID-19 pandemic ravaging the world, 2020

managed to secure profitability thanks to what we believe

was a year of perseverance. Facility upgrades were

were the results of our aggressive efforts at diversifying

postponed and production cut measures were taken, but

the business portfolio. Japan continues to suffer from theat the same time, the acquisition of Tokai COBEX Savoie

impact of the COVID-19 pandemic, but the global economy

was undertaken for the Company’s future growth. The

is trending upward, especially in China, which was the

downturn in our core Graphite Electrodes and Carbon

first to resume economic activities, and in the US, which

Black businesses caused by slowdowns in the steel andimplemented a massive fiscal stimulus package to boost its

tire industries negatively impacted consolidated financial

economy. Our business is starting to recover as well after

results as net sales dropped 23.1% YoY to 201.5 billion yen,bottoming out in the first half of 2020. The rollout of vaccines

operating income dropped 85.5% YoY to 7.8 billion yen,will likely further accelerate the economy going forward, andnet income attributable to owners of the parent company

we are determined to seize this growth opportunity.

dropped 96.8% YoY to 1.0 billion yen, and EBITDA dropped
54.2% YoY to 35.2 billion yen.

8

TOKAI CARBON INTEGRATED REPORT 2020

In the past, it would not have been a surprise if thechange. Despite the substantial drop of sales and profits, weINTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Back togrowthtrajectory

Our focus will now be more on developing the integration
synergies within the expanded business portfolio to maximize
sales and profits.
President and CEO

Hajime Nagasaka

Creating synergies from the M&A

is equipped with the technology to mass-produce generalpurpose products at a low cost, which complements ourI would like to take a look back at some of the initiatives

production technology in Japan. These two acquisitions of

we have worked on since I became president. The theme

North American operation were very meaningful for us.

for the initial two years from 2015 to 2016 was structural

Meanwhile, to improve our business portfolio, whichreform. First, we worked diligently to shape the mindset ofis overly dependent on the two core businesses, we

our employees, and to face our past problems. The nextstrengthened our Fine Carbon business in anticipation

four years from 2017 to 2020 was a growth phase focusedof future growth in semiconductor demand by making

on M&A. We invested total of approximately 180 billion yen

Tokai Carbon Korea Co., Ltd. a consolidated subsidiary.

for a series of M&A during these four years. The investment

Furthermore, we acquired German manufacturer COBEX

started with acquisitions in our two core businesses,

HoldCo GmbH (now Tokai COBEX HoldCo GmbH) to

specifically Graphite Electrode and Carbon Black plants inenter the aluminum-related market, which is expected to

North America. The EAF ratio (EAF production to the total

grow steadily on the back of demand for lighter weightcrude steel production) in North America is around 70%,

automotive parts. We followed this up with the launch ofwhich is far higher than the rest of the world. The North

our Smelting and Lining business by acquiring Tokai COBEX

American production plant for the Carbon Black businessSavoie in France together with its access to the electric

TOKAI CARBON INTEGRATED REPORT 20209

Message from the President

vehicle (EV) market, which is expected to expand in Europe.

the fine carbon, smelting and lining, and industrial furnace

It was not a smooth journey, but our series of initiatives

markets. Furthermore, on top of adding new businesses,

from structural reform to portfolio diversification were well

we also believe that it is important to review businesses

received by investors, and our market capitalization, whichthat we do not project substantial growth in, and I consider

was around 80 billion yen when I became president, has

this to be the second phase of the structural reform that werisen to around 400 billion yen.

undertook in the past when I started my role as President.

This six-year period was at a rather higher running pace.

governance structure to enhance our ability to promote2023) should be a term to stop for a moment to solidify

company-wide strategies in a rapidly globalizing world.

our business platform and focus on creating integration
synergies with the companies we have acquired so far inorder to stay competitive going forward.

Aiming for record high sales by
capturing the upward trends

Creating integration synergies throughoverall optimization

Again, the upward trends in our target industries are

To create integration synergies from our series of M&A

operating income to be nearly as high as its 2018 level,

deals, we have already laid the groundwork toward

when our Graphite Electrodes business expanded

achieving overall optimization, such as consolidating

unexpectedly due to market fluctuations.

increasingly apparent, and we are aiming for record highsales as part of our T-2023 plan. We are also expecting

production and allocating production items to locations

For the Graphite Electrodes business, which saw aclose to end markets, and we expect to start seeing thesevere drop, the market conditions for a recovery are now

benefits of these efforts in 2021. To be more specific, wein place with the completion of inventory adjustments andused to export a certain amount of graphite electrodes fromthe expansion of electric furnace steel production, andJapan and Germany to the US, but we are now increasing

we expect production volumes and sales prices to begin

the production capacity of our North American productiona full-scale recovery in 2022 and 2023. Similarly, we expect

plants and shifting toward producing and consuming locally.

our Carbon Black business to remain strong as production

In addition, with regard to our Smelting and Lining business,

expands in our target tire market.

we will push for efficiency improvements by switching

In the Fine Carbon business, demand for use inproduction items between Tokai COBEX’s plant in Poland

semiconductors and solar power generation continues toand Tokai COBEX Savoie in France. At the same time, wegrow, and Tokai Carbon Korea, the production base forwill transfer the extruded materials currently produced atsolid silicon carbide (Solid-SiC) focus rings, is performing

the Tanoura Plant in Japan to Tokai COBEX Savoie to boost

particularly well. As such, we are looking to expand ourour cost competitiveness. Furthermore, we will manufacture

production capacity in a timely manner to take advantage ofanode materials for lithium-ion batteries at Tokai COBEX

further market growth. Meanwhile, we will fully transfer the

Savoie, which we intend to make into a manufacturing baseproduction of extruded materials to Tokai COBEX Savoie

for the European EV market, which is expected to grow.

in France, and as part of our “selection and concentration”

T-2023: Pushing forward whilesolidifying our operational platform
I will now explain the three basic policies of our T-2023

approach, we will reorganize the processing and sales
bases of the Fine Carbon Division in Europe to improvethe efficiency of our production and sales systems and to
drastically reduce costs.
In the Smelting and Lining business, we have alreadyplan. The first is to return our core businesses to a path of

consolidated the brands of the two companies we acquired

growth. Our target industries, namely steel, automobiles,

into Tokai COBEX, and are working to improve productivity

semiconductors, and aluminum, are all on a recovery

and operational efficiency by unifying customer databases,

and growth trend. As such, we will seize this opportunity

sharing manufacturing technologies, and integrating

to improve profitability and stabilize earnings in oursystems to integrate production, sales, and accounting

core Graphite Electrodes and Carbon Black businesses.

management functions. Going forward, we are looking

The second policy is to optimize our business portfolio

to accelerate the integration process and strengthen our(selection and concentration). We will concentrate ourpresence in terms of both sales and profits.

limited management resources on our growth andcompetitive businesses to further enhance our presence in

10

Finally, our third policy is to strengthen our consolidated

The T-2023 (medium-term management plan for 2021-

TOKAI CARBON INTEGRATED REPORT 2020

The industrial furnace business that we operate underTokai Konetsu Kogyo Co., Ltd. has secured stable andTokai Carbon Value Creation

INTRODUCTION

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Overview of medium-term management plan T-2023

T-2023 basic policies
 eturning core businesses toRa path of growth ptimizing the businessO
portfolio• Manage to increase the operation rate
as the market grows• Improving and stabilizing the
profitability of graphite electrodes(selection and concentration)

 trengthening theSconsolidated governancestructure• Continually revising businesscomposition and product composition• Responding to globalization of thehead office organization• Increasing production capacity forhigh value-added products• Strengthening the governancestructure, mainly through the businessand head office management
functions• Concentrating investment inpromising businesses and productdevelopment• Building an ESG management baseT-2023 Quantitative Targets¥320 billion¥57 billion

Net Sales

Operating Income(¥201.5 billion in 2020)(¥7.9 billion in 2020)

18 %¥86 billion

Return on Sales (ROS)

EBITDA

Also targeting ROIC of 12%
and ROE of 15%(4% in 2020)(¥35.3 billion in 2020)(Reference) Comparison with previous T-2022 plan
(Billions of yen)
350

(%)
35

Net Sales¥320 billion

Operating Income

300

30

ROS (right axis)

T-2023 Quantitative Targets
Set targets based on current
business environment

250
200

25
20

18%
150

15

100

10

¥57 billion

50

5

0

0
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

(T-2022) T-2023

Projected EBITDA growth by business segment for T-2023 period
2021 to 2023

Plan

EBITDA (Billions of yen)
35

Graphite Electrodes
Smoothly resume production whenthe market rebounds* Circle sizes correspond to net sales amounts

30

Carbon Black (CB)
Secure an optimal spread between
raw material and sales prices

GraphiteElectrodes

25

Smelting
and
Lining20

CB

15

Smelting and Lining
Improve profitability through consolidation
Fine Carbon (FC)Supply more highly competitive products
and develop next-generation products

FC

10
5

Industrial Furnaces
Other Operations (Friction Materials/Anode Materials)

0
0%
-50

10%

20%
EBITDA margin

30%

Business category and goals

40%

Industrial Furnaces and Related Products
Maintain high profitability throughnewly developed furnaces
Other Operations(Friction Materials and Anode Materials)
Improve profitability anddevelop new products

Revenue base
Generate stable cash flow
Concentrate on highquality markets

Growth businesses
Increase production ofhigh value-added products
Develop new products
to maintain competitive
advantage

Businesses to restructure

TOKAI CARBON INTEGRATED REPORT 202011

Message from the President

high profits while building up a track record fueled by the
expansion of the 5G, IoT, and electric vehicle (EV) markets,and the future is very promising.

Prioritizing debt reduction andallocating cash flow

Lastly, we have positioned the Anode Materials

Through the above initiatives, we expect to generate aand Friction Materials businesses as businesses to be

cumulative total of 150 billion yen in operating cash flow

restructured. In the Anode Materials business, which hasover the three-year period covered in T-2023, of which

been sluggish in the face of fierce competition, we areapproximately 66 billion yen will be allocated mainly forlooking to take on the challenge of accelerating growthfacility upgrades, environmental impact reduction, andby fundamentally revamping our business model, which

growth investments. In 2020 in particular, we secured cash

includes expanding into Europe. Likewise, in the Friction

reserves by quickly procuring funds as an emergency

Materials business, where it is difficult to pursue a growth

response to the COVID-19 pandemic, but we also

strategy that simply builds on what has worked in the

postponed some of our planned facility upgrades, and thispast, we will undertake more in-depth structural reforms

situation needs to be addressed appropriately.

to strengthen our competitiveness and fundamentally

In addition, we plan to allocate 37 billion yen for debt

improve profitability.

reduction to bring our net debt-to-equity ratio to zero in an

Strengthening governance to integrate
operations of diverse companies

effort to maintain or improve our credit rating. For the M&A
funds used to launch the Smelting and Lining business, wewill use hybrid financing to maintain a sound financial basewhile also stabilizing our liquidity by converting short-term
debt into long-term debt.

As a result of a series of M&A deals, over 70% of our sales

Finally, we plan to allocate the remaining 47 billion yen

are now generated overseas, and naturally, over 70% of
our employees are also based overseas. We believe thatto shareholder returns and strategic investments. With

strengthening our consolidated governance structure is an

regard to shareholder returns, we are focusing on paying

extremely important priority in operating group companies

stable and continuous dividends while maintaining a basicwith different cultures and business practices in an integrated

dividend payout ratio of 30%, and our policy is to maintainmanner and demonstrating our strength as a “United Tokaian annual dividend of 30 yen per share for 2021. With thisCarbon,” while also caring for the environment and society.

overall allocation of cash flow, we believe that we will have

Under the T-2023 plan, in parallel with our initiatives to create

to take a cautious approach to strategic investments for the

integration synergies, we will strengthen our management

time being.

functions on three fronts, which include the head officecorporate division, the business management division, andthe internal audit division.

Allocation of operating cash ﬂow
In principle, funds needed for investment in growth will be provided by cash on hand and operating cash ﬂow• Facility upgrades

Forecast operating
cash flow
over three years¥66 billion• Overall optimization (throughput improvement)• Facility expansion• Environmental equipment

Debt
reduction¥37 billion

Repay debt to increase the Company’s ability toinvest in the futurefrom 2021 to 2023

¥150

billionStrategic investments(M&A and capital tie-ups)

Shareholder returns

12

TOKAI CARBON INTEGRATED REPORT 2020

Continue pursuing mergers and acquisitionsin the automotive and electronics industries tocapitalize on future growth opportunities
Payment of stable and continuous dividends
Flexible share buybacks

Source of future value

Capitalinvestment

Tokai Carbon Value Creation

INTRODUCTION

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Our ESG efforts
have been wellreceived byinvestors

Promoting ”Carbon neutrality”

We have made carbon our business for over a century,

Last but not least, in 2020, we were included in two leading

viewing it as an indispensable “material that brings joy”.

ESG investment indices, the FTSE4Good Index Series andHowever, with the movement toward carbon neutrality, we

the FTSEBlossom Japan Index for the first time. We believe

must seriously consider how we can contribute to societythat this is the result of our efforts to establish an ESG

and our planet in the long term. More specifically, we havemanagement base and improve information disclosure as

recently launched the Carbon Neutrality Project with myself

part of our key measures in T-2021, which we announced

as the project leader, and will implement it as a cross-

two years ago.

organizational initiative. Additionally, we will be working on

We have no choice but to seriously address carbon
neutrality, an issue which is rapidly gaining momentum.

the analysis and disclosure of climate change risks in linewith TCFD policies.

Our approach to sustainability
Business category

Approach

Key examples

Current status•C ontinuing PDCA management ofmaterialities and KPIs
•D
 eveloping consolidated informationcollection system (during T-2023 plan
period)•D isclosing analysis of climate change risks(2021)•C ompleted human rights due diligence

Group-wide• Strengthen ESG management base• Expand ESG disclosure• Identification and management ofmaterialities and KPIs
• Establishment of a consolidated
environmental data collection andmanagement system• Disclosure of climate change risks in linewith TCFD policies.
• Human rights initiatives

GraphiteElectrodes• Adjust production in line withelectric furnace steel growth• Improve productivity by reducing
electrode consumption rate

• Development of new, highly functional
electrodes•1 0% improvement in electrodeconsumption rate in user equipment tests

Carbon Black• Recover and reuse waste heat
• Recycle carbon• Power generation using waste heat energy,
etc.
• Recycling of tires and carbon black•P rivate power generation and supply ofelectricity to communities•S tarted dialogue with supply chain

Smelting and
Lining• Reduce customer energy
consumption per unit
• Use renewable energy• Proposal of RuC, a cathode with reduced
environmental impact• Switch to renewable energy•G ood results in user equipment tests•S witched power for the production plants
in Poland to 100% renewable energy
sources

Anode Materials• Support the development andmanufacture of battery materials
that contribute to EV adoption• Development of anode materials with highfunctionality and low carbon footprint•S elected as one of the companies eligible
to receive the EU Commission’s battery
development subsidy

TOKAI CARBON INTEGRATED REPORT 202013

History of Tokai Carbon Value Creation
The Tokai Carbon Group pioneered the manufacturing of graphite electrodes in Japan. Since then, we havecontinued to grow and have established new growth businesses in carbon black, fine carbon, industrial furnaces,
anode materials, friction materials, and smelting and lining.

Enriching Japan as a country.
That was how Tokai Carbon began.

We are expanding that abundanceand supporting a sustainable society.

Tokai Carbon was founded in 1918. The company wasrooted in the founder’s idea that he wanted to enrich thelives of people through the domestic production of highquality electrodes essential to steel production, which
was an industry of national importance. We have built
unshakable reliability, earned through consistent, steadyefforts over time to provide useful technologies topeople, to society, and to the world without wavering, formore than 100 years.

We have held firmly to the view that we must focus on
mutual relationships of trust and never sacrifice theabundance of others or the environment, precisely
because Tokai Carbon is a company that provides
convenience, freedom, and comfort to the daily lives ofpeople. We are actively working to achieve thesustainable development goals (SDGs) adopted by theUnited Nations while confronting issues in the global
environment, society, and governance.

Sales(Billions of yen)
300

250

200

150
2000
Thai Tokai Carbon Product Co., Ltd.
acquired as a consolidated subsidiary

100

50

0
1918

14

1990

1992

TOKAI CARBON INTEGRATED REPORT 2020

2000

Tokai Carbon Value Creation

INTRODUCTION

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

The Corporate Philosophy of Tokai Carbon

Ties of Reliability
We hope to build Ties of Reliability with our stakeholders (customers, suppliers, shareholders,
employees, society, etc.) by providing them with the means to realize their respective objectives andby responding to their requests without fail.

There is a reason why we have also
succeeded in friendly M&A.

The “Ties of Reliability” that we havecultivated for more than a century constitutethe corporate philosophy of Tokai Carbon.

In the mergers and acquisitions we have executed in thepast, we have been able to build very good relationships
through such means as holding a welcome ceremony
hosted by local employees and inviting the mayor andlegislators to participate. We have been able to share ourrecord of accomplishments over more than a century andour corporate culture of placing importance on “ties” inmany cases. We are delighted that our M&A partners feelthat things will go well if they partner with Tokai Carbon.

Developing “Ties of Reliability” with our shareholders,customers, suppliers, local communities, employees, and allother stakeholders around the world through our corporate
activities is the corporate philosophy of Tokai Carbon. We
regard shareholder return as an important management issue
in striving to enhance corporate value over the long term, andwill work to provide stable, consistent dividends while taking
investment plans, cash flow, and other factors aimed at revenue
growth in mind.
2020
Tokai Carbon Savoie SAS acquired

2019
Tokai Cobex GmbH acquired2018
Tokai Carbon Korea Co., Ltd.,acquired as a consolidated subsidiary
Tokai Carbon CB Ltd. acquired
2005
Tokai Erftcarbon
GmbH acquired2017
Tokai Carbon GE LLC acquired

2014
Cancarb Limited acquired

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

TOKAI CARBON INTEGRATED REPORT 202015

Tokai Carbon’s Value Creation Model
The Tokai Carbon Group has been leading the carbon industry in Japan for over a century. Drawing on our strong
management platform and multiple strengths, we are able to support the sustainable development of a wide
range of industries and society while helping to lower the burden on the global environment through our business.

INPUT

Tokai Carbon’s

Source of competitive advantage

Megatrends* As of December 31, 2020

Tokai Carbon
is facing

Manufacturing Capital
Capital Expenditure¥28.9 billion
Emergence ofclimate change risk
and the rush to
Carbon neutrality

Intellectual Capital
Patents

88* As of December 31, 2020. Includes the number filed in 2020.

¥2.7 billion

Progress in DX** Digital Transformation

Non-Japanese/Total employees

69％
Global Locations

44
12
Financial Capital

43.8%
Net D/E Ratio

0.239
Rating (Rating & Investment Information, Inc. (R&I))

A-

16

TOKAI CARBON INTEGRATED REPORT 2020

P.24

4,178

Capital-to-asset ratio

Concern forhuman rights
and diversity

Carbon Black business

P.22

Number of Employees (consolidated)

Countries Where We Operate

Great-power
rivalry between
the US and China

Graphite Electrode business

Human CapitalSocial Capital(utilizing AI and IoT)

➔ Produce synergistic effects▲

Arrival of acoexisting with
COVID-19 or
post-COVID-19
world

R&D Expenditures➔ Generate stable cash flow▲

Rapid expansionof EVs, renewableenergy, electric
furnaces, etc.

Revenue Base

Tokai Carbon’s Strengths
Business portfolio as
a comprehensive
carbonmanufacturer

Technologicalprowess

Business expansion

Technological expansion

In addition to its position asa pioneer in graphite
electrodes and carbon black,
the Group has developed aportfolio that covers a wide
range of carbon andgraphite-related ﬁelds,
including ﬁne carbon,
smelting and lining materials.

The Tokai Carbon Groupleads the carbon industry
with high-quality materials
and innovative
cutting-edge materials
based on more than 100
years of technologicalexpertise.

Foundation that supports
value creation

Corporate

Tokai Carbon Value Creation

INTRODUCTION

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Long-term vision

A global company
supporting society
with carbon products
Business Model

OUTPUTOUTCOME

Products and services offered

Value provided to stakeholders

Graphite Electrodes

Growth businesses

Saving Energy/
Cutting CO2 Emissions➔ Boost production in line withmarket growth➔ Develop new products withadded value
P.28▲

Industrial Furnaces andRelated Products

P.26

▲

Smelting and Lining business▲

Fine Carbon business

For DC Furnaces(direct current furnaces)

P.30

Businesses subject tostructural reform▲

Other Businesses

Carbon Black

SEAST

Fine Carbon
P.31➔ Steelmaking with a lower
environmental burden➔ Helping to promote adoptionof solar and wind power

Development of
a Recycling-Oriented
Society➔ Recycling ofsteel scrap(Friction Materials, Anode Materials)

Isotropic Graphite G/HK Series

Smelting and Lining

Global reachLong-term
relationships withcustomers andsupply chains

Regional expansion

Trust expansion

We are expanding
production and sales bases
not only in Japan but also in
Asia, Europe, and North
America to pursue growthmarkets and opportunities
on a global scale.

The Group’s long-term,
trust-based relationships
with customers and raw
material suppliers aroundthe world contribute to its
business continuity andstability.

Enhancement of
Safety andConvenience in Daily Life
Cathodes for aluminum smelters

Industrial Furnaces andRelated Products

Industrial Furnaces

Other Businesses (Friction
Materials, Anode Materials)▲

Governance➔ Enhancing tire performance fora safer driving experience➔ Technology for smart devices

Development ofIndustrial andSocial Infrastructure➔ Contributing to the productionof high-quality steel➔ Technology supporting
industrial robots

P.40

Paper Friction Materials/
Anode Materials (Copper Plates)

TOKAI CARBON INTEGRATED REPORT 202017

2020 Performance Data

Consolidated Financial Indicators
Net Sales¥201,542

Operating Income¥7,858millionmillion73,065*

262,028
231,30288,580201,542

54,344106,252
11,093

7,858

1,131
2016

2017

2018

2019

2020

ROIC

1.6

2016

2017

2018

2019

2020

ROE

%

0.5

29.6*

%
46.8*

13.1
7.7
0.7
2016

2017

2018

2019

0.5

1.6

-6.8

2020

2016

ROS

3.9

16.0

10.4

2017

2018

2019

2020

EBITDA¥35,262%

million31.6*

85,130*77,05320.7

35,262

10.4
1.3
2016

2017

2018

2019

3.9

10,6162020

2016

17,7402017* FY2018 figures were retroactively revised due to the confirmation of provisional accounting treatment of the business combination of
Tokai Carbon Korea Co., Ltd. and Tokai Carbon CB Ltd.

18

TOKAI CARBON INTEGRATED REPORT 2020

2018

2019

2020

Tokai Carbon Value Creation

INTRODUCTION

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Non-financial Indicators (Tokai Carbon Co., Ltd.)
Energy Consumption Rate*

103.9

GHG Gas Emissions Rate (Production)

727

% YoY
99.1

97.4

t-CO2/thousand tons (product weight)

103.9

95.4

1,011

1,007

930
727

2016

2017

2018

2019

Waste Generation* and Recycling Rates

91

%

84

Waste generated
Recycling rate

84
73

2016

2018

2019

91

Waste Consigned for Processing andWaste Sent for Final Disposal
Final disposal rate
Waste consigned
for processing

68

Final disposal rate

5,117

2017

* Period: April to March yearly base
* Based on Tokai Carbon Co., Ltd.’s CO2 emissions and production volume (weight)* Period: April to March yearly base

Recycling rate

2016

6,391

2017

7,067

7,589

2018

2019

32

8,747

2020

15

%

43

28

2,388

2,665

2016

2017

24

4,765

3,228

3,026

15

2018

2019

2020

*V
 olume of waste generated = Volume consigned for processing + Volume recycledinternally or externally, and volume of valuable waste

Occupational Accidents (Frequency rate*)

Water Usage

2,684

0.55

thousand m3/yr.
2,612

2,698

2,761

2,684

Tokai Carbon Co., Ltd.
Manufacturer(100 or more employees)

1.15

1.12

1.20

1.02

1.07

2017

2018

1.20
0.53

0.55

2019

2020

0.00
2016

2017

* Period covered: April to March of the following year

2018

2019

2016

* Frequency rate: Injuries or deaths per million working hours* As of April 2021, the FY2019 frequency rate of occupational accidents for
manufacturing businesses (with 100 or more employees) has not been announced.

TOKAI CARBON INTEGRATED REPORT 202019

2020 Highlights

Solid SiC Products to
Support the Evolution of
Semiconductors
Solid SiC Focus Rings, which are highly regarded by semiconductor device and equipment manufacturers aroundthe world, are flourishing from the strong demand for high-performance semiconductors.

01

Solid SiC Focus Rings enter growth phase

High integration to enhance semiconductor performanceon the outside of a silicon wafer to concentrate the plasma

is expanding from miniaturization in two dimensions to 3D

on the wafer and ensure uniform processing. Traditionally,(stacking) where circuits are stacked three-dimensionally.

focus rings were mainly made of silicon metal or quartz glass.

This development towards 3D accelerates larger demand

However, with the increase in the number of etchings and thefor solid SiC Focus Rings.

boost in plasma power accompanying the transition to 3D

A focus ring is a component used in the etching process,where a plasma-enhanced gas is used to dig grooves insemiconductors, there has been a shift to solid SiC, which has
excellent plasma resistance.

semiconductor circuits. It is an important component placed
Chronological Development of Materials for Focus Rings
The switch to SiC products possessing superior strengthand heat resistance will progress as semiconductor
devices become increasingly miniaturized.

SiC

Silicon or quartz
GlassyCarbon

1990

20

TOKAI CARBON INTEGRATED REPORT 2020

2000

2010

2020

Present

INTRODUCTION

Strategy for Value Creation

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

What is Solid SiC?
This product is a pure CVD-SiC, which features ultra-high purity SiC. This is achieved using the Group’s proprietary
CVD* method to thicken the SiC coating, which is normally about 100 microns (0.1 mm).
As a material with excellent strength and corrosion resistance, it is an ideal material for use in semiconductor
manufacturing equipment.
* CVD (Chemical Vapor Deposition): A method of depositing a film through a chemical reaction by supplying a raw material gas containing the components of thedesired thin film to the surface of a base material heated in a reaction tube.

02

Becoming the leading supplierof solid SiC products

The Group installed a CVD furnace at Tokai Carbon Korea

Business results of Tokai Carbon Korea Co., Ltd. (TCK)Co., Ltd. (TCK) in 2002 and began developing solid SiC(Unit: Millions of won)

Focus Rings in 2006, successfully commercializing themin 2013. Solid SiC Focus Rings have demonstrated theirtrue value under severe conditions of use, and sales havebeen growing steadily as demand has increased. As apioneer in the field of solid SiC Focus Rings, the Group ishighly regarded by semiconductor device and equipment
manufacturers for quality, and is currently the top supplierwith an 80% share of the global market.

250,000

6.5x
Sales
Operating income

200,000

150,000

2013
Commercializationof Solid SiC Focus
Rings started

100,000

20x

50,000

0
2013

2020

ColumnSemiconductor manufacturing equipment market trends and forecast
The semiconductor market is expected to continue to grow briskly due tothe rapid increase in the volume of data distribution, the establishmentof big data analysis and cloud services, the spread of 5G communication
networks, and the spread of CASE in the automotive industry. In order tomeet the increasing demand for semiconductors, capital investment ina wide range of semiconductor manufacturing equipment, from highperformance to general-purpose products, is expected to continue, andthe market is expected to grow at an annual rate of 5-7%.
Dry etching equipment: Cross-sectional view

(Unit: Millions of dollars)

100,000

75,00050,00025,000Freon gas
PlasmaCooling water

Exhaust0
2015

2020 2021

2025 (Year)(As of April 2021. Estimated by the Company based on industry forecasts.)
Solid SiC Focus Ring

Cooling water
Wafer

TOKAI CARBON INTEGRATED REPORT 202021

GRAPHITEELECTRODES

Business Overview

Graphite Electrodes

Generating stable earnings backed by thegreater demand for high-quality electrodes2020 Summary

5.77 billion yen operating loss in the same period with 3.66
billion yen inventory valuation losses (devaluation of book

Global crude steel production in 2020 remained at the samevalue) associated with the deteriorating market conditions.

level as the previous year, driven by the Chinese market,(Millions of yen)which recovered quickly from the COVID-19 pandemic.

Operating income

ROS

Electric arc furnace steel production, which directly affects

201991,31739,38843.1%

graphite electrodes demand, dropped by 5% YoY excluding

2020

37,879-5,766-15.2%

the Chinese market. Graphite electrode sales dropped

2021 plan

40,900

1,300

3.2%

58.5% YoY as the excessive inventory in the market took time

Reference
figures for 2023

82,40023,3302.8%

to come down to a normal level. The division recorded a

22

Net sales

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Strategy for Value Creation

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Medium-Term Management Plan andEarnings Forecast
In 2021, both crude steel production and electric arc
furnace steel production are expected to return to 2019
levels backed by the fiscal stimulus measures taken in majorcountries. Graphite electrode demand will significantly
improve from the previous year following the reduction ofgraphite electrode inventory in the market. The Graphite
Electrodes business is expected to return to profitability in
2021, and furthermore we will aim for a fair profit that will let
us reinvest for stable production and supply.
Looking ahead to the next three years of our mediumterm management plan, T-2023, the business environmentis expected to improve further. One reason is the shift in

Kenji Enokidani
Executive Officer
General Manager of the Graphite Electrodes Division

the steel making process from blast furnaces to electric arc
furnaces to achieve the lower CO2 emissions. In fact, plans
for the construction of several new large-scale electric arc

Although the performance of the graphite electrodes

furnaces have been announced, and in China, the shift frombusiness in 2020 was significantly downwardly affected byblast furnaces to electric arc furnaces is expected to proceed

the COVID-19 pandemic, graphite electrodes will growrapidly. As a result, demand for graphite electrodes, which

in importance as the environment problem comes to be

are essential for electric arc furnace operation, is expected

recognized as a shared global issue. In view of how the tide

to increase significantly. Based on this forecast of an upturnis changing, the Company is committed to fulfilling its supply

in demand, we will strengthen our long-term relationshipresponsibilities, thereby contributing positively to solvingof trust with our customers by providing a stable supply of

the global environmental issues. Under T-2023, we intend tohigh-quality electrodes, taking advantage of our strength

take advantage of this opportunity to expand the electrodein covering the global market with our production plants inmarket in order to strengthen our business foundation toEurope, Asia, and North America.

generate stable earnings over the next three years.

Shift to electric furnace steel production• Strengthening environmental regulations(CO2 emissions control)

Build long-term stable supply relationships
Mitigate transportation and physical risks• Increased scrap recycling demand

Signs of increasing steel productionin Europe and the United States• Carbon border tax inEuropean countries• US infrastructure investment

Increased demand for high-quality electrodes
Tokai Carbon’s response
1. Procurement and supply of raw materialsof local production for local consumption
2. New high-performance electrodes
3. Technical services that increase productivity

Innovation in electric furnace technology• Production of high-grade steel in electric furnaces• Increase in the size of electric furnaces

Growth in global crude
steel production• Rapid recovery and growth of GDP• Growing demand for steel in Asia
Increase productivity in high-load
operations 10% improvement per unit
(compared to our company’s products)
Expertise as a pioneer of electrodes forlarge electric furnaces
Support for optimization ofoperating conditions

TOKAI CARBON INTEGRATED REPORT 202023

Business Overview

Carbon Black

Align production withmarket growth at a fair margin
2020 Summary

Medium-Term Management Plan andEarnings Forecast

Net sales declined 30.5% YoY due to the US-China trade

With the recovery of automobile production, sales volume

friction and the COVID-19 pandemic, which caused ain 2021 is forecast to exceed that of the previous year. On

significant stagnation in production by tire manufacturers,

the other hand, the significant increase in costs due towho are our main customers, in the first half of the year.

the rise in raw material oil prices has reached a level that

In addition, operating income declined by 62.5% as lower

cannot be absorbed by means of the Company’s efforts

sales prices and lower capacity utilization drove an increase

alone. We therefore intend to improve our profitability byin costs as a percentage of sales. On the other hand, salesraising prices.

volume in the second half of the year increased by 30%

Tire production, which is said to be proportional to thecompared to the first half thanks to the rapid recovery ofgrowth rate of the world economy, is expected to growautomobile production, reflecting the unpredictable impact

at an annual rate of 7% during the period of the medium-of the COVID-19 pandemic on market conditions in 2020.

term management plan, T-2023, with its rebound from theprevious decline. Given that 80% of our carbon black is(Millions of yen)

Net sales

Operating income

ROS

used for tires, we expect to maintain a high rate of capacity

2019

101,751

8,512

8.4%

utilization by aligning production with market growth.

2020

70,754

3,192

4.5%

With respect to increasing our sales prices, our intention

2021 plan

78,000

5,400

6.9%

is to secure an appropriate margin by allowing not only

Reference
figures for 2023

100,600

9,900

9.3%

rising raw material prices to be passed on, but also costs
for investments, including environmental investments.
Meanwhile, we aim to increase the ratio of next-generation
products that extend tire life, as well as high-value-added
non-tire products that take advantage of special raw
material characteristics. We will also continue to createsynergies through measures to reduce raw material costs
and the sharing of production technologies and know-how
in our global 5-country production structure, including Tokai
Carbon CB Ltd., which we acquired as a subsidiary in 2018.
We will also focus on environmental contributions. In
addition to promoting efforts to recycle used tires to
produce carbon black, the Company is also researching
the production of carbon black from vegetable oil insteadof fossil fuels such as petroleum and coal. We also plan toHirofumi Masuda
Member of the Board
Executive Officer
General Manager of the Carbon Black Division

24

TOKAI CARBON INTEGRATED REPORT 2020

develop advanced technologies to recover and reuse CO2
generated in the production process.

INTRODUCTION

Strategy for Value Creation

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

CARBONBLACK

Global Tire Production

Initiatives during the T-2023 period(Millions)

3,000

1. Align production with market growth and maintain highcapacity utilization

Expect to maintainannual growth of 7%*

2,500

2. Ensure an appropriate margin• Incorporate fluctuations in raw material prices andcosts for investment into the sales price

2,000
1,500

3. Increase the ratio of high-value-added products(ongoing effort)• Promote certification of developed products andincrease the sales ratio of high-value-added products

1,000
500
0
2009

2014
Actual2019

2024
Forecast

Our estimate based on automobile market forecasts and research company reports* Annual growth forecast: 7% during T-2023, 3-5% after 2024

2029

4. Sustainability initiatives• Recycling of used tires• Production of carbon black from vegetable oil• Research on technology for CO2 recovery and reuse

TOKAI CARBON INTEGRATED REPORT 202025

Business Overview

Fine Carbon

Boosting our production capacity of
CVD-SiC products to meet the strong
growth of the semiconductor market
2020 Summary

manufacturing. Tokai Carbon enjoys a global market shareof about 80% for this product. In addition to the growing

The COVID-19 pandemic negatively affected sales fordemand for semiconductors, the company is also benefiting

general industrial applications. On the other hand, productfrom the semiconductor industry’s switch of ring material

shipments for semiconductor devices continued to performfrom conventional silicon or quartz focus rings to morewell throughout the year with the expansion of markets suchdurable SiC focus rings as the devices become increasingly

as 5G, IoT, and DX (digital transformation). We experienced

miniaturized and multilayered.
(Millions of yen)robust sales in the photovoltaic application market as well.

Operating income

ROS

As a result, net sales in this business increased by 4.6% YoY

201930,369

6,107

20.1%

and operating income increased by 8.8% YoY, exceeding

2020

31,775

6,647

20.9%

the forecast at the beginning of the year. In particular, there

2021 plan

33,700

5,700

16.9%

was a significant increase in sales of Solid SiC Focus Rings,

Reference
figures for 2023

41,900

8,700

20.8%

which are used in the etching process of semiconductor

FINE
CARBON26

Net sales

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Medium-Term Management Plan andEarnings Forecast
The Tanoura Plant, which produces graphite materials forfine carbon, was damaged by the torrential rains of July
2020, but thanks to measures such as utilizing the heat
treatment facilities at other group sites, the plant has now
been restored to full production. We are also in the processof redoubling our preparedness for anticipated natural
disasters in the future. In 2021, the expansion in production
capacity is underway for further growth.
Under our medium-term management plan, T-2023, we
expect the semiconductor production equipment market
to grow by 5-7% per year, and demand for solar power
generation to grow by around 10% per year in line with the

Hideo Shin
General Manager of the Fine Carbon Division

global shift to renewable energy. Given these conditions,in our fine carbon business, we plan to increase production

reorganization, such as consolidating the production of

capacity of isotropic graphite materials in 2021. Similarly, we

extruded graphite materials at Tokai COBEX Savoie inplan to increase production capacity of solid SiC Focus Rings

France, which joined the Group in 2020. In addition,

in Korea by 50% compared to 2019. We are also building

while striving to control CO2 emissions in the supply chain,

new high-purity processing furnaces in China and state-of-

we will contribute to reducing the environmental burden

the-art CVD-SiC furnaces in Japan, aiming to increase theby producing and supplying high-quality fine carbon

ratio of high-value-added products to achieve sales growth

products that are essential for the production of energy

above and beyond the boost from the increase in scale.

efficient power semiconductors and photovoltaic power

At the same time, we will improve cost competitivenessgeneration equipment.

and production efficiency through cross-divisional

Business Environment
The semiconductor and photovoltaic markets arebooming and expecting further growthWith the semiconductor supply shortage,
continued growth is expected in the
manufacturing equipment market
Semiconductors(5-7% per year)

Strategy
1. Expand scale in line with market growth• Increase production capacity of isotropic graphite materials

2. Focus on the high-value-added product market• Increase SiC ring production capacity(Korea: 2nd half of 2021)• Introduce state-of-the-art CVD-SiC furnaces(Japan: 1st half of 2021)• Install new high-purity furnaces (China: 1st half of 2021)

Demand is expected to grow in line withthe global shift to renewable energy
Photovoltaic
generation (PV)(10% per year)

Source: Semiconductors: Our estimate based on WSTS, Gartner, and others;
PV: Our estimate based on RTS Corporation and others.

3. Overall optimization• Consolidate extruded material production to France(Tokai COBEX)• Make effective use of heat treatment facilities within the Group• Reduce costs by reorganizing processing sites in Europe

TOKAI CARBON INTEGRATED REPORT 202027

Business Overview

Smelting and Lining

Integration of TCX and TCS will
significantly enhance sales and productivity
2020 Summary

the previous year. In addition, we were able to secure operating
income of 1.16 billion yen despite recording 9.69 billion yen in

Tokai COBEX (TCX), which became a subsidiary in July 2019,amortization expenses associated with M&A.

contributed to the Group’s consolidated financial results
throughout the year, and in July 2020, Tokai COBEX Savoie(TCS) in France was added, further expanding the scale of ourbusiness in cathodes used in aluminum smelters. The aluminum
market was sluggish in the first half of the year due to the global
economic slowdown caused by the COVID-19 pandemic. In
the second half of the year, however, the situation improved
due to the recovery in automobile productions. Shipments of

Medium-Term Management Plan andEarnings Forecast
Due to the need for lighter materials in EVs and other products
and the increasing demand for urban housing in emerging
countries, global aluminum demand is increasing. On topof that, the demand for high-end graphite cathodes for
efficient smelting is increasing mainly in emerging countries.

blast furnace blocks, which are materials used to line the inner

We therefore forecast a 25% increase in sales in 2021 withpart of blast furnaces, were also at a high shipment level due

Tokai COBEX Savoie acquired in July 2020 giving a full year

to strong replacement (upgrade) demand in China. Despite

contribution to financial results for 2021. We are currently insome logistical delays caused by COVID-19, net sales from thethe process of integrating the sales, production, engineering,

Smelting and Lining business increased almost 1.5 times overhuman resources, and other organizational units of the sites in(Millions of yen)

Net sales

Operating income

ROS

Poland and France, and will continue to improve profitability
going forward.

2019

14,662-1,600-10.9%

The first action item in the medium-term management plan,2020

36,421

1,161

3.2%

T-2023, is to integrate operations in Poland and France in order2021 plan

45,600

2,200

4.8%

to significantly enhance sales and productivity. Specifically, weReference
figures for 2023

61,20010,10016.5%

will consolidate high-strength graphitized cathodes in Germany
and consolidate pastes and sidewalls in France. Furthermore,as part of our efforts to create synergies across the entire
Group, in addition to the production of extruded specialty
graphite materials for the Fine Carbon business at our French
operation, we are considering transferring the battery anodematerials produced in Japan to our French site, where the EV
market is expected to grow rapidly.
Secondly, we will accelerate market development with ourinnovative product, RuC (Ready-to-Use Cathode). Aluminum
smelting furnaces, which consume large amounts of electricity,
are increasingly switching to graphitized cathodes that canwithstand high currents in the pursuit of production efficiency.
We developed the RuC, which features a copper bar attachedto the cathode, as a way to further reduce the environmental

Takashi Masaki
Executive Officer
General Manager of the Smelting and Lining Division

28

TOKAI CARBON INTEGRATED REPORT 2020

burden. In addition, as part of our goal of achieving adecarbonized society, the French plant will use hydroelectric
power generation and the Polish plant will be powered byrenewable energy.

INTRODUCTION

Tokai Carbon Value Creation

Proposal of
an innovative cathode

Strategy for Value Creation

Foundation that Supports Corporate Value

Two plants in France (formerly Carbone Savoie)
FranceVenissieux plant

FranceNotre Dame de Briançon plant

Financial Section & Corporate Data

Two plants in Poland (formerly COBEX)
PolandNowy Sacz plant

PolandRacibórz plant

RuC®
Ready to Use Cathode• Reduces CO2 emissions by
reducing energy per unit
(approx. 5%)• Extends cathode life by
1-3 years• No need for rodding ofconducting bars by customer

Integrated both in name and reality starting in 2021

Integrated as TOKAI COBEX
Sales benefits• Unify sales brand names• Improve ability to propose
solutions to problems• Centralize customer database

Production technology benefits• Consolidate 100 years oftechnical expertise• Six Sigma approach to cost
reduction

Management benefits• Production, sales, andaccounting management on
unified databases through
ERP system integration(January 2023)

Smeltingand Lining
TOKAI CARBON INTEGRATED REPORT 202029

Industrial
Furnace andRelatedProducts

Business Overview

Industrial Furnaces and Related Products

Aim for continuous high profits
focusing on the development of
next-generation furnaces
2020 Summary

growth markets and focus on winning new orders by

The growth in 5G base stations and the transition to EV

capabilities. In particular, we will strive to respond quickly

lead to robust capital investment in the MLCC (monolithic

to our customers’ next-generation products and promoteceramic capacitor) industry, which drove the sales increase

the development of industrial furnaces with energy-savingin the industrial furnace business. EREMA (silicon carbide)and waste-heat recovery systems. We will also differentiate

heating elements and other products sales declined as

our consumables, such as our EREMA heating elements, bya result of the COVID-19 pandemic, although the overall

developing and launching environment-friendly products,

business sales were up 9.8% YoY and operating income

and gradually increase our production capacity in anticipation

increased 16.6% YoY to a record high level.

of a recovery in demand. Meanwhile, looking ahead to theleveraging our track record, know-how, and development(Millions of yen)

Net sales

Operating income

future, securing technical personnel is another priority task.

ROS

2019

12,641

3,227

2020

13,873

3,765

25.5%
27.1%

2021 plan

18,300

4,400

24.0%

Reference
figures for 2023

19,800

5,100

25.8%

Medium-Term Management Plan andEarnings Forecast
We are experiencing steady orders intake for industrial
furnaces, which should support an increase in sales andprofit in 2021. Our end user markets in MLCCs and lithiumion batteries are growing in the range of 5-10% and 20-30%
respectively on an annual basis. Under our medium-term
management plan, T-2023, we will concentrate on these30

TOKAI CARBON INTEGRATED REPORT 2020

Akihiko Sato
Tokai Konetsu Kogyo Co., Ltd.
President

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Other
Businesses(Friction materials,
Anode materials)

Business Overview

Other Businesses (Friction Materials, Anode Materials)

Aiming to improve profitability bypromoting automation

2020 Summary

profits in the Other Businesses category to increase in 2021.

Net sales of friction materials declined by 13.0% YoY due

harsh price competition among the emerging new players.

to the impact of our exit from the four-wheel automotive

Under our medium-term management plan, T-2023, whichmarket and the sluggish market for construction machinery,prioritizes improving profitability, we plan to thoroughly

agricultural machinery, and motorcycles caused by the

reduce inventory and gradually automate our labor-

COVID-19 pandemic. Net sales of anode materials rose byintensive production systems. At the same time, we will

14.3% as sales volumes for EVs increased, mainly in Europe.

focus on improving quality and developing next-generation

Revenue from real estate rentals and other items decreased

products by leveraging our strength in materials technology.

The friction materials business has become fierce due to

2.6%. As a result, overall net sales in these businesses
declined by 4.0% from the previous year, but operating
income returned to the black.
(Millions of yen)

Net sales

Operating income

ROS

2019

11,286-21

2020

10,837

298

-0.2%
2.8%

2021 plan

11,400500

4.4%Reference
figures for 2023

14,100

1,400

9.9%

Medium-Term Management Plan andEarnings Forecast
At present, sales of friction materials for construction
machinery, agricultural machinery, and industrial robots
are picking up in China, and sales of touring and sports
motorcycles are growing in Europe, so we expect sales andYoshiharu Tachibana
General Manager of the Friction Materials Division

TOKAI CARBON INTEGRATED REPORT 2020

31

ESG Management
Basic policy and structure
To further underscore our stance on contributing to environmental and social issues of a global magnitude through our
corporate activities, the establishment of an ESG management base is currently one of our key medium-term measures.
To propel such a structure, the Company’s CSR Committee meets four times a year, in principle, to continuously run the
PDCA cycle.
Global ESG framework
Tokai Carbon Head Ofﬁce

Human Resources
Department

Environment & Safety
Department

General Affairs Department
and Legal Affairs Department

Administration

Reporting
KPI results reporting

Administration

Reporting

Subsidiaries (contact person)

ReportingCorporate Planning
Department

Business divisions /Corporate Planning
Department

Board of Directors

Management Committee

Information sharing

CSR Committee
Administration

Subsidiaries
Relevant
departments
Relevant
departments
Relevant
departments

Sustainability targets (KPIs) and results
ThemesHarmony with theglobal environment

Contributing tosociety throughour business

Strengthening
management baseMateriality

Elements

Reducing environmental impact

Specific numerical targets

FY2020

Reduce greenhousegas emissions• Reduce energy consumption per unit production (cut by 1% or more on an annual basis)

Reduce pollution• Dispose all of the low-concentration PCB waste, by March 31, 2025
• Maintain zero environmental claims against the Company(contamination of air, water, etc.)

Scope

Non-consolidated• Recycle 75% or more of waste

Realizing a recycling-oriented society

Recycle waste

Technological innovation

Emphasize research anddevelopment• Invest 60% or more of the development expenditures to reduce environmental burden• 60% or more of patent applications in areas of reducing environmental burden

Non-consolidated

Supplying safe and secured products

Further elevate quality• Reduce electrode consumption rate (3% reduction from 2019)Non-consolidated

Supply chain management

Raise supplier awarenessof CSR• Make all key suppliers aware of Tokai Carbon Group procurement policies

Reduce CSR risks at suppliers• Conduct CSR surveys at key suppliers (first year)

Respect for human rights

Raise employee awareness ofhuman rights

Non-consolidated• Conduct human rights training at all Tokai Carbon locations (total hours)• Set human rights training time requirements for all Tokai Carbon Group companies in Japan Group companies
in Japan(total hours)• Establish global human rights policies and ensure all employees understand them
Consolidated

Contribution to community

Actively engage in community contribution activities

Strengthening corporate governance

Establish a consolidated governance system

Ensuring compliance

Maintain ethical standards,
regulatory compliance• Zero serious regulatory violations• Attendance of 80% or more employees to the education and training program forcompliance issue.

Increase employment of
women• Larger portion of female workers• 30% of new graduate recruit to be female

Effectively implement training• Total employee training hours planned by head office(new-hire training / specialist training)

Reduce occupational accidents• Reduce frequency rate of occupational accidents (0.98 or lower)• Reduce lost-time accidents to 13 days or less (severity rate of 0.007 or lower)

Human resource development

Promoting occupational safety andhealth32

Goals

TOKAI CARBON INTEGRATED REPORT 2020

• Final disposal rate of 30% or lower

Non-consolidated

Non-consolidated
Consolidated
Non-consolidated

Non-consolidated

Non-consolidated

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Materiality identification process
In November 2019, as a first step to establish an ESG management base, we specified our “Materiality” issues for Tokai Carbon.

Identified theissues from theperspectives of both
Tokai Carbon andour stakeholders

Discussion in CSR
Committee (underthe management
committee) by
having an input fromexternal experts

Assessed theimportance of theissues identified

Resolution of theBoard of Directors

Setting sustainability targets (KPIs)
Sustainability targets (KPIs) have been set for each

include all Tokai Carbon Group companies in Japan. We

materiality issues followed up by running the PDCA cycle.

have been also working to set up a system to gather ESG-In 2020, we started our initiatives from Tokai Carbon

related data from global group companies to establish aJapan. From FY2021, we have expanded our scope toGroup-wide ESG framework.

RatingResults
Target unmet due to an increased ratio of fixed energy consumption of equipment
as a result of reduced production amid the COVID-19 pandemic and other factors(up about 11% year on year during the April–December 2020 period)• Almost on target with about 40% of low-concentration PCB waste having been
disposed of•N o environmental claims filed
91% of waste recycled

15% final disposal rate
87% of development expenditures devoted to reducing environmental burden
100% of patent applications filed in areas related to reducing environmental burden
67% of relevant users met the reduction target, 33% did not meet the target withno change: Target met: Less than 60% of target met

FY2021
Specific numerical targets

Rating*1: 60%–90% of target met

Scope• Reduce energy consumption per unit production (cut by 1% or more annually)

Group companies
in Japan*2• Dispose of all low-concentration PCB waste by March 31, 2025
• Maintain zero environmental claims against the Company (contamination of air, water, etc.)

Group companies
in Japan• Recycle 80% or more of waste• Final disposal rate of 25% or lower

Group companies
in Japan• Devote 80% or more of development expenditures to reducing environmental burden• Devote 60% or more of development expenditures to reducing environmental burden• Make 80% or more of patent applications in areas related to reducing environmental burden• Make 60% or more of patent applications in areas related to reducing environmental burden

Non-consolidated
Tokai Konetsu Kogyo
Non-consolidated
Tokai Konetsu Kogyo• Reduce electrode consumption rate (3% reduction from 2019)Non-consolidated

Selected key suppliers, familiarized them with our procurement policy, andconducted a socially responsible procurement survey• Make all key suppliers in the Tokai Carbon Group aware of the Group’s procurement policies

Provided human rights training to managers and candidates for managerial
positions at the parent company and affiliates in Japan[Hours of training provided] 182 hours at the parent company, 141 hours ataffiliates in Japan
Formulated the Global Human Rights Policy in July 2020 and informed all
employees (on a consolidated basis) about it
Total amount of donations and activity spending: Approx. 20,620,000 yen
Number of employees who participated: Approx. 420
Continued promotion of internal controls, the Group-wide rollout of an internalreporting system, and the development of similar functions at the US headquarters• Implement harassment training based on the results of a harassment awareness survey

Non-consolidated• Implement human rights due diligence training

Group companies
in Japan• Improve understanding of the Global Human Rights PolicyGroup companies
in Japan• Roll out CSR surveys to key suppliers in the Tokai Carbon Group

Consolidated
Consolidated

No serious regulatory violations• No serious regulatory violations

90% of employees received compliance education/training• Formulate and disseminate a global code of conduct to all global subsidiaries

Ratio of female employees as of the end of December 2020 on a non-consolidated
basis: 8.5% (7.9% as of the end of December 2019)• Increase percentage of career-track female employees (Tokai Carbon Japan)

Ratio of female new graduates hired in FY2021: 33.3%

New-hire training: 13,392 hours; specialist training: 1,672 hours(global leader training, job rank-based training)
Frequency rate: 0.55

Target unmet with 90 lost workdays (severity rate of 0.05), although there was only
one lost time incident

Consolidated• New career-track female graduate hiring ratio of 30% (Tokai Carbon Japan)

Consolidated
Non-consolidated
Non-consolidated• Total training hours planned by head office (new-hire training / specialist training)Group companies
in Japan• Reduce frequency rate (0.98 or lower)• Reduce severity rate (0.007 or lower)

Group companies
in Japan*1 Since the period covered is from April of each year to March of the following year, the estimated achievement level is based on the status up to December.
*2 Group companies in Japan consists from the Tokai Carbon (standalone) plus the major domestic subsidiaries (Tokai Konetsu Kogyo, Tokai Fine Carbon, Tokai Material)

TOKAI CARBON INTEGRATED REPORT 202033

Environmental Management
Basic ideas

Environmental policy principles

Tokai Carbon Group treats protection of the global environment as one ofits highest management priorities. To harmonize our business activities withenvironmental needs, we have implemented an environmental management
system based on an independently established environmental policy and theISO 14001 international standard. Toward that same end, we also qualitatively
and quantitatively evaluate the environmental impacts of our business activities,
focusing on production and distribution, and take various steps to reduce them.

1. Enhance our environmental
management system
2. Promote effective use of resourcesand energy
3. Comply with relevant
environmental laws
4. Promote environmental education
activities and social contribution
activities
5. Disclose environmental information

Management structure for advancing environmental disaster prevention
Tokai Carbon has established an environmental

take on challenges, the achievement of which will havemanagement structure consisting of the Environmental

progressively greater benefits for the environment.

Disaster Prevention Head Office Committee and theEnvironmental Disaster Prevention Business Division
Committees through which Group companies participate.
The Environmental Disaster Prevention Head Office

Management structure for environmental disaster prevention
Environmental Disaster
Prevention Head Ofﬁce
Committee

Committee establishes major strategies and policies,and each business division pursues activities in line with
the ISO14001 international standard for environmental
management and is subjected to the PDCA cycle. Moving

Environmental Disaster
Prevention Business Division
Committees

General Manager, Technology & Engineering Division
Environment Safety Management Department
Managers of relevant departments
Business division manager or person designatedby business division manager
Production Technology / Department manager /Plant manager / Designated person
Ofﬁce

forward, we aim to ensure ongoing improvements andISO 14001-based environmental management system
Tokai Carbon has obtained ISO 14001 certification forenhance the effectiveness of our environmental protection

all of its plants in Japan. As of October 2020, 80.7% ofactivities through regular audits internal audits performed

Tokai Carbon Group major manufacturing site, including

by designated Company auditors and external audits

the overseas, have the certificate. We are striving toperformed by independent certification bodies.

Environmental objectives
In advancing its environmental activities, Tokai Carbon undertakes initiatives focused on the following four targets.
1. Legal compliance
We carefully confirm the requirements of relevant laws, ordinances, community treaties, and agreements and properly comply with them. In 2020, we
had no business locations in violation of key regulatory limits or standards, and we had no cases of environmental lawsuits or penalties.

2. Zero environmental claims
Even when within standards outlined in relevant laws, ordinances, community treaties, and agreements, we appropriately respond to any incidents
that could cause trouble for the local community. No significant environmental claims were made against Tokai Carbon in 2020.

3. Reduction of energy consumption per unit
Tokai Carbon works to cut its emissions of CO2 and other greenhouse gases by reducing its energy consumption per unit production. As a midterm target, we aim to achieve S-class rating by reducing 1% energy consumption on a year-on year basis following the standards of the Energy
Conservation Law.

4. Reduction of industrial waste
In 2020, Tokai Carbon furthered its recycling efforts by searching for and hiring a new company to process valuable waste items. As a result, werealized reductions in the volumes of industrial waste sent out for consigned treatment or final disposal. Based on our 2020 results, we have raised
our 2021 recycling target to 80% or more and reduced our final disposal rate to 25% or less. Going forward, we will redouble our efforts to separate
waste by category and recycle whenever possible to further reduce the amounts of waste handled through consigned treatment or final disposal.

34

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Awareness of risks and opportunities
in climate change, risk management

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Just like other key risks, the Board of Directors manages
and monitors climate change risks within the framework of
the Company-wide risk management system. Whenever

The Tokai Carbon Group recognizes that responding tonecessary, the director responsible for risk management

climate change is a key management issue. While we havereports on important items to the Board.

already devised flood countermeasures at high-priority
divisions, decentralized risk by setting up multiple sites

Carbon-neutral initiatives

for mainstay businesses, and incorporated climate changerisks into our business continuity plan (BCP), in order togauge the risks and opportunities in the Group posed by

On May, we have launched a Carbon Neutrality Promotion

climate change, since December 2020 we have continued

Project with the president as project leader. This is toto perform business impact assessments with the use ofpropel the Group’s efforts on reducing carbon emissions

scenario analysis, one of the requirements of the TCFD

to net zero across the entire organization with the goal ofrecommendations. Going forward, we plan to disclose therealizing a carbon-neutral society. We have started to review

results of our scenario analyses.

reduction targets and measures through this project.

Greenhouse gas emissions (non-consolidated)
2016

2017

2018

2019

CO2 emissions (t)*1, *2

228,904

256,943

255,989

3,900,214

Scope 1 (t)*1

38,99044,332

44,77836,681

Scope 1 breakdown: CO2

38,99044,332

44,77836,681

CH4

0

0

0

0

N2O

0

0

0

0

HFCs

0

0

0

0

PFCs

0

0

0

0

SF6

0

0

0

0

Others0000

Scope 2 (t)*1

185,474

206,312204,321

128,693

Scope 3 (t)*2

4,439

6,299

6,890

3,734,840

Category 1: Purchased goods and services*3

—

—

—

469,342

Category 2: Capital goods*4

—

—

—

19,862

—

—

—

N/A
4,903

Category 3:	Fuel-and energy-related activities not includedin scope 1 or scope 2
Category 4: Upstream transport and delivery*

4,439

5,551

6,234

Category 5: Waste generated by business operations*5

—

748

656

501

Category 6: Business travel

—

—

—

N/A

1

Category 7: Employee commuting*6

—

—

—

413,096

Category 8: Leased assets (upstream)

—

—

—

N/A

Category 9: Downstream transport and delivery

—

—

—

N/A

Category 10: Processing of sold products

—

—

—

N/A

Category 11: Use of sold products*7

—

—

—

2,827,136

Category 12: End-of-life treatment of sold products*8

—

—

—

0

Category 13: Downstream leased assets

—

—

—

N/A

Category 14: Franchises

—

—

—

N/A

Category 15: Investments

—

—

—

N/A

*1 Data collection period: From April to March each year. Only energy sources in Scope 1.
*2 The Data collection period for Categories 1–3 and 5–15 under scope 3, for which data collection commenced in 2019, is from January to December. References for the calculationof scope 3 include Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain (ver. 2.3; Ministry of the Environment and Ministry of Economy,
Trade and Industry (METI)), Database on Emissions Intensities for Calculating Greenhouse Gas Emissions, etc. through a Supply Chain (Ver. 2.6; Ministry of the Environment and
METI), and emission coefficients for each power supplier released by the Ministry of the Environment.
*3 Calculated by multiplying the total amount of main raw materials purchased by the applicable emission intensity.
*4 Calculated by multiplying the purchasing price of capital goods by the applicable emission intensity.
*5 Calculated by multiplying the volume of waste disposal by type and the volume of recycling by the applicable emission intensity.
*6 Calculated by multiplying the number of employees by the number of operating days and the applicable emission intensity.
*7 The Scope of reporting is the Graphite Electrode Division. Calculated by multiplying the energy consumption of products and the sales volume by the applicable emission
intensity and then adding CO2 emissions generated by the products when in use.
*8 The Scope of reporting is the Graphite Electrode Division.

TOKAI CARBON INTEGRATED REPORT 202035

Respect for Human Rights
Basics on human rights
We believe that consideration for human rights is important in order to realize our corporate philosophy of“Ties of Reliability”. We support the Universal Declaration of Human Rights, which declares the “common standards
that all peoples and all countries must achieve” in order to respect and ensure human rights and freedoms.

Global Policy on Human Rights
To fulfill our corporate responsibility on respecting humanrespecting human rights within the Group, applies to allrights, we undertake business activities with a strong sense

employees and business sites, and requires that our businessof ethics based on the United Nation’s Guiding Principles

partners comply with its provisions. The Tokai Carbon Groupfor Business and Human Rights. In keeping with these

Human Rights Promotion Committee plays a central roleinternational agreements on human rights, we establishedin promoting employee awareness about the policy and

the Tokai Carbon Group Global Policy on Human Rights

our approach so that we can further ramp up Group-widein July 2020. The policy sets out specific guidelines on

initiatives on respecting human rights.

Provisions of Tokai Carbon Group Global Policy on Human Rights1)	Compliance with laws andregulations2)	Prohibition of discrimination
3)	Prevention of child labor andslave labor4)	Support for basic labor rights5)	Reduction of excessive working hours
and securing right to wages6)	Health and safety standards7)	Prohibition of harassment

Human rights due diligence
Tokai Carbon Group conducts human rights due diligence
to ensure corporate respect for human rights in order
to identify and assess, as well as prevent and address,
potential human rights risk arising from the entire value
chain and corporate-related human rights-issues.

8)	Respect of privacy9)	Prevention and mitigation of negative
impacts on human rights10)	Response to human rights violations

Process of our human rights due diligence
1

Identifying country risks

2

Defining the scope of assessment

3

Putting investigation into practice4

Assessing5

Monitoring and conducting improvement measures

Initiatives for human rights awareness
Tokai Carbon conducts group-wide and division-specificviolations of the rights of person with disabilities andtraining to instill an awareness of human rights in its

people from other countries. In 2020, human rights training

employees. Based on the Global Human Rights Policy of

was conducted for management personnel, with thethe Tokai Carbon Group, training focuses on reinforcing

participation of 182 employees at Tokai Carbon and 141

an understanding of the basic way of Respecting Human

employees at Group companies in Japan.

Rights. It includes addressing discrimination, harassment,

36

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Strategy for Value Creation

Financial Section & Corporate Data

Human Resources Development
Basic ideas on hiring and employment
Tokai Carbon guarantees fair employment opportunities for all individuals and considers only aptitudes and strengths
in making hiring decisions. We make no distinctions based on race, geographic origin, nationality, age, gender, sexual
orientation, or disability. In hiring recent college graduates, we seek goal-oriented, self-directed individuals who welcome
challenges, are problem solvers, and will cooperate with others. When it comes to mid-career hires, we look for people
who have skills that respond to our overseas business development, technical development, and other business needs.

Initiatives for human resources development
In line with our long-term vision of being“A Global

our ability to create value – two of the themes of our basic

Carbon company Contributing to a Better Society,” Tokai

philosophy. We aim to further strengthen the capabilities ofCarbon devotes significant attention to human resource

our employees and improve our value creation capabilities

development as a way to heighten internationalism andas an organization.

Certification and ranking system

Education and training

Tokai Carbon operates a certification and ranking system thatdiffers depending on career development track, as definedby responsibilities, department assignment, and rotation. Thissystem allows career development tracks to be changed based on
Company needs or employee preferences and opens the door to
rapid promotion of outstanding individuals.

1. Selective training
In 2017, we introduced overseas language training, global leadershiptraining, and executive management training to develop candidates
for future leadership positions at Tokai Carbon. In 2020, mid-career
employees selected by the business divisions for participation in these
programs global leadership training for six months. In 2021, we willconduct overseas language training for two months and executive
management training for six months.

Evaluation system
We employ a goal management system that outlines performancegoals and topics to clarify target goals for each employee. Each
employee participates in a meeting during which they set specificgoals and are given progress evaluations to increase individual
motivation, promote personnel development, and ensure
performance management.

Self-assessment
Tokai Carbon has a system under which employees — mainly
general career-track employees whose professional education
includes position rotations — annually assess the volume andquality of their work and express desires for current and future
positions and locations.

2. Stratified training
Tokai Carbon regularly conducts stratified training for generalmanager, manager, mid-level, second year, and new hires. These
training programs are open to participation by employees of Group
companies, as well. We enhanced training for new hires from 2019and conducted about three months of on-site training at plants, alongwith introductory training at the Head Office, in order to provide
new hires with basic knowledge regarding the safety and production
management, etc. required of employees of a manufacturing company.
From 2021, we will enhance the stratified training for younger
employees by years of service and mid-level employees by each level,in order to offer opportunities to nurture career design and a global
mindset and obtain basic knowledge of MBA, etc.
The training time per employee of selective and stratified training is 19
hours per year.

Opportunities for women
In our general employer action plans for promoting the
careers of women formulated in 2020, we set goals overNo. of employees, employee turnover (voluntary), and percentage
of female employees to total employees (Non-consolidated)

a two-year period beginning April 2020 and extending to* Excluding fixed-term workers

March 2022 to increase the hiring of female new graduates
to at least 30% of people taken on for career-track positions
and to attain a 65% or higher acquisition rate of annual
paid holidays. While the percentage of females to thetotal number of new graduates taken on for career-track
positions hired in 2021 reached 33%, we will continuously
work on increasing the hiring of female new graduates forcareer-track positions and creating a comfortable work
environment for female employees.

2018

2019

2020

No. of employees

729

769

778

Employee turnover (voluntary)

14

17

11

Percentage of female employees tototal employees

6.7%

7.9%

8.5%

Percentage of females to the total
number of employees taken on forcareer-track positions

20.0%

42.9%

20.8%

TOKAI CARBON INTEGRATED REPORT 202037

Occupational Safety and Health
Basic ideas for occupational safety and healthOccupational safety and health is one of the Tokai Carbon Group’s highest priorities and a key concern of management.
Aiming to keep our operations free of occupational accidents, we strive to ensure that everyone working in our facilities
is sensitive to potential dangers.

Health and safety management structure
To confirm the status of health and safety activities at

Tokai Carbon health and safety organization charteach operating site and to deliberate and outline core
initiatives related to health and safety, we convene Central
Health and Safety Committee meetings attended by labor

Environment & Safety Department
Central Health and
Safety Committee

Technology departments
Labor unionand management representatives, including executives
responsible for occupational safety. Every year, we set policies

Operation sites

for enhancing occupational safety and health at Central

Site manager

Health and Safety Committee meetings in order to keep
improving occupational safety and health going forward. In
2021, the frequency rate management value is 0.98 or less. At

Regional Health and
Safety Committee

Safety manager / health manager /industrial physician
Labor union

Tokai Carbon, the Board of Directors supervise occupational

Officesafety and health risk, and the board member in charge ofrisk reports important matters such as occupational accidents
to the Board of Directors as necessary.

Improving occupational safety and health
At Tokai Carbon, we continually engage in full-participationthat resulted in lost workdays. When an accident resulting

safety management and regularly conduct activities toin lost workdays occurs, we first analyze the situation

nip danger in the bud, give presentations of near misses,

in on-site verification, then thoroughly understand thehold KYT (hazard prediction training), and so on, as riskroot cause through further analysis, and then develop

assessments for the present dangerous work procedures

recurrence prevention plans. Moreover, we not only draw

and dangerous places in facilities, ultimately eliminating

up those countermeasures, but also visit plants to do safety

occupational accidents. In 2020, there was one accident,

inspections and check the effectiveness of the recurrence

involving a worker who was hurt by a falling heavy object

prevention plans.

Labor relations
Tokai Carbon respects the rights of employees, including theExpert Committee on Human Resources Systems. Working

freedom of association and the right to collective bargaining.

from a foundation of trust and cooperation labor andTokai Carbon has signed a union shop agreement withmanagement fulfill their respective responsibilities and strive

the Tokai Carbon Labor Union. Union membershipto implement policies that promote positive interaction.

includes 86.3% of Tokai Carbon employees (as of the

When it seeks to implement organizational and employment

end of December 2020). Labor and management discuss

policy changes, management consults with the union before

matters concerning labor relations and business activities infinalizing decisions.

meetings of the Labor Committee, Work Committee, and

38

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Reliable Product Supply / CSR Procurement
Business/customer attributes and basic way of thinking
Owing to a customer base spanning a wide array of industries and sectors, Tokai Carbon Group’s products are utilized
in a broad range of fields, including automotive, steel, electronic components, agricultural equipment, and lithiumion batteries. Accordingly, we believe that maintaining a stable supply of high-quality products is our most basic
responsibility. Moreover, given that we form part of the supply chain of our customers, it goes without saying we abide
by relevant laws, regulations, and social norms, but we also continually make every effort to minimize the environmental
impact of our manufacturing operations.

Diversified plant location and local production
Diversified plant location, local production

Raw material procurement

In the past, Tokai Carbon Group based its production in Asia. In the

For both carbon black and graphite electrodes, there are only a

1990s, however, we expanded our business area to the global market.

limited number of raw material suppliers. It is our responsibility to the

In an effort to add production facilities in various locations, we havestakeholders to stably provide our quality products to our customers

taken actions such as establishing a carbon black plant in China inby continuously sourcing the raw material. In procuring raw materials

2004, acquiring the German graphite electrode manufacturer TOKAI

for carbon black, we select suppliers based on careful considerations of

ERFTCARBON GmbH in 2005, and acquiring the Canadian carbon

volume, pricing, and raw material types.

black manufacturer Cancarb Limited in 2014. In 2017 and 2018 we also

As for needle coke for graphite electrode, we could centralize theacquired graphite electrode and carbon black manufacturers in Northprocurement which now are handled by individual locations as Japan,

America. These actions have made us a global player with production

U.S. and Europe if that works for a greater stability in procurement.

and sales functions near customers, and the ability to reliably supply
high-quality products, in both of these businesses.

Quality management
To establish a basis for quality management, we havelevel of quality. We also conduct a periodical assessment

acquired the international quality management standard ofand exchange opinions regarding the effectiveness of

ISO 9001 for all of our manufacturing facilities in Japan. We

our quality management system to gain a unified quality

are running the plan-do-check-act (PDCA) cycle for all of ourmanagement throughout the division’s offices and plants.

processes to ensure that our customers are satisfied with the

Basic way of thinking on CSR procurement
In order to face the global environmental and social challenges as

Tokai Carbon Group Procurement Policy
https://www.tokaicarbon.co.jp/en/sustanability/
pdf/pdf_procurement.pdf

an involved party, we are intent on contributing to the building of a sustainable society together with our suppliers byadhering to our Procurement Policy.

Implementation of CSR procurement survey for our business partners
Tokai Carbon Group procure raw materials from suppliers worldwide at each global site. We request our business partners toagree with our Procurement Policy and respond to our CSR procurement survey so that we can confirm their compliance status.

TOKAI CARBON INTEGRATED REPORT 202039

Corporate GovernanceCorporate governance structure
As a company with an Audit & Supervisory Board, Tokai Carbon focuses on enhancing the effectiveness of audits by
Audit & Supervisory Board members and our internal audit functions. At the same time, we work to strengthen the
management supervision functions of the Board of Directors by appointing multiple external directors and establishingvoluntary committees in order to realize an appropriate corporate governance structure.

Board of Directors

Management Committee

The Board of Directors is responsible for making decisions

The Company has established the Management Committee

on important management matters and overseeing

under the Board of Directors. This committee deliberates

business execution. In principle, the Board meets monthly.

and makes decisions on important management matters

As of March 30, 2021, there are nine directors, includingin accordance with basic policies adopted by the Board

three external directors.

of Directors. The Management Committee meets once aweek, in principle, with participation by executive officers
and Audit & Supervisory Board members, etc.

Audit & Supervisory Board members and Audit & Supervisory Board
Audit & Supervisory Board members audit the performancefour Audit & Supervisory Board members, two of whom hailof duties by directors by attending important meetingsfrom outside of the Company.

such as Board of Directors’ meetings and conducting
investigations into the Company’s operations and assets in

Corporate Governanceaccordance with auditing policies and plans adopted by the

https://www.tokaicarbon.co.jp/en/sustanability/corporate_
governance.html

Audit & Supervisory Board. As of March 30, 2021, there are

Corporate governance system

Appointment /Dismissal◎ : Chairman (Board of Directors) / Chairperson (committees)● : External / Independent 〇 : Internal

General Meeting of Shareholders
Appointment /Dismissal

Appointment /Dismissal

Audit & Supervisory Board

Board of Directors

Audits execution of duties by board members
and executive ofﬁcers

Oversees execution of duties by board members
and executive ofﬁcers

Control

Audit

Cooperation
Voluntary advisory bodies

Nomination Committee
Appointment/dismissal of directors

Remuneration Committee

Accounting Auditor

President
Management Committee

Determination of remuneration forboard members and executive ofﬁcers

Risk Management & Compliance Committee
Risk governance advice

Internal Auditing Ofﬁce

Executive bodies

40

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Discussion items
Subject category
Governance, risk management,
and subsidiary management

Human resources and organization
Accounting and financeManagement strategy and sustainability
Other

Topic

Analysis and evaluation of effectiveness of Board of Directors
Reports on financing, investments, and market risk management
Internal audit reports
Risk Management & Compliance Committee reports
Board member and executive officer candidates
Reorganization
Financial statements
Annual budget plans
Formulation of medium-term management plans
Reports on ESG activities and sustainability targets
Matters concerning the General Meeting of Shareholders
July 2020 Kyushu flood relief donations
Subject category
Management
strategy andsustainability

15.2%

Accounting
and ﬁnance

23.2%

Other 2.4%

Governance,risk management,
and subsidiarymanagement

32.8%
Human resourcesand organization

26.4%

Strengthening the effectiveness of
the Board of Directors
In 2016 we established the Nomination Committee,
Remuneration Committee, Management Committee, andRisk Management & Compliance Committee in an effort
to drastically bolster the Company’s governance structure
under the Board of the Directors. The effectiveness of
the Board of Directors is annually evaluated by the issues
identified and improved. Through this process, the initial
benefits are being appropriately maintained and enabling
further development of the board effectiveness.

Management appointment process
The appointment of board members, Audit & Supervisory
Board members, and executive officers begins with theformulation of recommendations by the Nomination
Committee, an advisory body to the Board of Directors
consisting of one internal board member and three externalboard members. The Nomination Committee preparesits recommendations by comprehensively considering theexperience, knowledge, expertise, and other qualities ofinternal and external candidates. After approval by the
Board of Directors, candidates for director and Audit &Supervisory Board positions are submitted to the General
Meeting of Shareholders for approval.

Establishing an internal control system

Executive remuneration

To ensure that Tokai Carbon Group properly executes

At Tokai Carbon, executive remuneration is composedbusiness operations in accordance with relevant laws,of basic remuneration, which is a fixed amount, andregulations and the Articles of Incorporation, the Company

performance-based remuneration, which varies depending

continuously improves its internal control system.

on achievement of performance objectives. For directors

Improvements are undertaken in accordance with the “Basic

with executive responsibilities, the proportion of total

Policy for Establishing an Internal Control System,” which

remuneration that is variable is designed to rise with

was adopted at the May 2006 meeting of the Board of

executive rank. This is in consideration of the significance of

Directors and is revised as necessary.

management responsibilities borne.

TOKAI CARBON INTEGRATED REPORT 202041

Corporate Governance

Skills matrix
Knowledge and experience expected

Term of
Gender office
Corporate
Finance and(years) management accounting

Name

President and CEO
Hajime Nagasaka

M

15

Member of the Board/Executive Officer
Yuji Serizawa

M

8

Member of the Board/Executive Officer
Masafumi Tsuji

M

4Member of the Board/Executive Officer
Katsuyuki Yamaguchi

M

2

Member of the Board/Executive Officer
Shunji Yamamoto

M

2

Member of the Board/Executive Officer
Hirofumi Masuda

M

1

Member of the Board(external/independent)
Nobumitsu Kambayashi

M

5

Member of the Board(external/independent)
Junichi Tanahashi

M

1

Member of the Board(external/independent)
Mayumi AsadaF

0Audit & Supervisory Board Member(full-time)
Masanao Hosoya

M

2

Audit & Supervisory Board Member(full-time)
Kazuyuki Kakehashi

M

5

Audit & Supervisory Board Member(external/independent)
Kaoru Ogashiwa

M

2

Audit & Supervisory Board Member(external/independent)
Motokazu Hiura

M

1

Legal
affairs andcompliance

Overseasbusiness

Manufacturing
andtechnology

Sales andmarketing

Personnel
Governanceand HRand riskdevelopment management

ESG andsustainability

Attendance at meetings of the Board of Directors, Audit & Supervisory Board, and committees (attendance/meetings) in FY2020
Position
Member of
the Board

Audit &
Supervisory
Board members

Name

Audit & Supervisory
Board

Nomination Committee

Remuneration
Committee

Risk Management &Compliance Committee

Hajime Nagasaka(19/19)

—

(4/4)

(4/4)

Yuji Serizawa(19/19)

—

—

—

(5/5)

Masafumi Tsuji(19/19)

—

—

—

(4/5)

Katsuyuki Yamaguchi(19/19)

—

—

—

(5/5)

Shunji Yamamoto(19/19)———Hirofumi Masuda(14/14)———

Nobumitsu Kambayashi (external/independent)(19/19)

—

(4/4)

(4/4)

Junichi Tanahashi (external/independent)(13/14)

—

(3/3)

(2/2)

Masanao Hosoya(17/19)(14/14)

—

—

(5/5)

Kazuyuki Kakehashi(19/19)(14/14)

—

—

(5/5)

Kaoru Ogashiwa (external/independent)(19/19)(14/14)——

Motokazu Hiura (external/independent)(12/12)

(9/9)

—

—

* Positions as of end-December 2020
* The [ ] symbol denotes chair or chairperson

42

Board of Directors

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Foundation that Supports Corporate Value

Strategy for Value Creation

Financial Section & Corporate Data

ComplianceInternal reporting system

The Company has outlined a Basic Policy, Guidelines, and a

We have introduced an internal reporting system for

Corporate Code of Ethics. We conduct corporate activities

receiving reports from employees who have found out about

in accordance with these policies and based on a strong

legal violations or fraud (or signs thereof), including any

ethical viewpoint while also complying with the relevant

acts linked to corruption such as bribery etc. by executive

laws, rules, and regulations. We have also prepared theofficers or employees. We have established in-house contact

Compliance Manual based on the Tokai Carbon Corporate

points (Legal Affairs Department, Audit & Supervisory Board

Code of Ethics and our Ethical and Compliance Conduct

Member) and external contact points (legal advisors) toStandards. The manual outlines the conduct standards thatreceive reports or requests for advice by phone, fax, email,all officers and employees are required to maintain as they

letter, etc. Reports can also be made anonymously. The

carry out their everyday duties, and is intended to help

Company’s Guidelines on Handing Internal Reports clearly

everyone in the Company understand compliance properly.

states that, apart from cases when the system is deliberately
misused, informants will not be dismissed or subjected to
unfair treatment under this system.

Prevention of corruption
Cases of corrupt behavior

prevent acts of bribery or acts that could arouse suspicion

In the FY2020, there was no exposure of corrupt behaviorof bribery, such as proposing or delivering benefits as

and no fines or surcharges paid. There was no disciplinarycompensation for others, and demanding or receiving

action taken against employees due to corrupt behavior.

benefits such as cash, excessive business entertainment,
amusement or other services. We also prohibit corrupt

Prevention of bribery and other corrupt behavior

behavior in the form of conspiracy to embezzle company

Board oversight of corrupt behavior

funds or commit money laundering. The prohibition ofthis kind of corruption and bribery is also specified in our
procurement policy.

Our Code of Ethics states that we will conduct business

The Board of Directors oversees initiatives on complianceactivities through fair competition and maintain sound andnormal relations with politicians, government officials, andincluding the prevention of bribery and other corruption

suppliers. It also states that we will comply with all laws

and receives reports from the Risk Management &and conduct business activities based on social norms andCompliance Committee.

common sense. Because of this, we prohibit and strive to

Education and Enlightenment
We continuously provide compliance training for executive officers, managers, new employees, etc. conducted by internal andexternal lecturers. We are also striving to raise compliance awareness among executive officers and employees via the in-house
distribution of a compliance message video and the publication of related articles in our in-house magazine.

Training theme
Year

Theme

Participants

2017

Anti-Monopoly Act

About 50

2018

ESG

About 45

2019

Issue of quality falsification

About 50

2020

Dialogue with shareholders/ Response to proposals from shareholders

About 50TOKAI CARBON INTEGRATED REPORT 202043

Corporate GovernanceManagement (As of July 1, 2021)
Member of the Board

HajimeNagasaka
President & Chief
Executive Officer

Masafumi
Tsuji
Member of the Board
Executive Officer

Career Summary

1972	Joined Tokai Electrode Mfg. Co., Ltd. (currently the Company)
2006	Member of the Board/Executive Officer
Deputy General Manager, Carbon Black Division2008	Member of the Board/Managing Executive Officer
Deputy General Manager, Carbon Black Division2010	Member of the Board/Managing Executive Officer
General Manager, Carbon Black Division2011	Member of the Board/Senior Managing Executive Officer
General Manager, Carbon Black Division2012	Member of the Board/Senior Managing Executive Officer incharge of Carbon Black Division and Graphite Electrode Division2013	Representative Member of the Board/Senior Managing Executive
Officer in charge of Carbon Black Division andGraphite Electrode Division2014	Representative Member of the Board/Executive Vice President incharge of Carbon Black Division, Graphite Electrode Division and
Raw Material Procurement Department
2015	Representative Member of the Board/President & Chief Executive
Officer (incumbent)

1984	Joined the Company
2006	Executive Officer/Deputy General Manager,
Fine Carbon Division2009	Executive Officer/General Manager, Fine Carbon Division2012	Member of the Board/Executive Officer in charge ofFine Carbon Division
General Manager, Fine Carbon Division2013	Member of the Board/Executive Officer
General Manager, Tanoura Laboratory
General Manager, Tanoura Plant
2014	Executive Officer
General Manager, Graphite Electrode Division2015	Member of the Board/Executive Officer
General Manager, Graphite Electrode Division2016	Member of the Board/Executive Officer
General Manager, Corporate Planning Division2017	Member of the Board/Executive Officer
Responsible for Human Resources Department,
General Affairs Department, and Legal Affairs Department(incumbent)

Yuji
Serizawa
Member of the Board
Executive Officer

Career Summary

Career Summary

1986	Joined the Company
2014	Business Director/General Manager, Carbon Black Division2015	Executive Officer
General Manager, Carbon Black Division2016	Executive Officer
General Manager, Graphite Electrode Division2017	Executive Officer
General Manager, Fine Carbon Division2017	Member of the Board/Executive Officer
General Manager, Fine Carbon Division2020	Member of the Board/Executive Officer
Deputy Chairman, Corporate Planning Department, Strategic
Investment Department, and Sales Research & Planning Department
General Manager, Corporate Planning Department
2020	Member of the Board/Executive Officer
Deputy Chairman, Corporate Planning Department, Strategic
Investment Department, and Sales Research & Planning Department
General Manager, Corporate Planning Department
General Manger, Sales Research & Planning Department
2020	Member of the Board/Executive Officer
Responsible for Corporate Planning Department, Strategic
Investment Department, and Sales Research & Planning Department
General Manager, Corporate Planning Department
General Manager, Sales Research & Planning Department
2020	Member of the Board/Executive Officer
Responsible for Corporate Planning Department, Strategic
Investment Department, and Sales Research & Planning Department
General Manager, Corporate Planning Department (incumbent)

1988	Joined the Company
2015	General Manager, Engineering Department,
Technology & Engineering Division2016	Business Director
General Manager, Technology & Engineering Division2018	Executive Officer
General Manager, Technology & Engineering Division
2019	Member of the Board/Executive Officer
General Manager, Technology & Engineering Division
2019	Member of the Board/Executive Officer
General Manager, Technology & Engineering Division
General Manager, Environment & Safety Department
2020	Member of the Board/Executive Officer
General Manager, Technology & Engineering Division
2021	Member of the Board/Executive Officer
General Manager, R&D Strategy Division
General Manager, Intellectual Property Department (incumbent)

Katsuyuki
Yamaguchi
Member of the Board
Executive Officer

Career Summary

Career Summary

1985	Joined the Company
2013	General Manager, Kyushu-Wakamatsu Plant
2015	General Manager, Production & Technology Department, Carbon
Black Division2016	Managing Director, THAI TOKAI CARBON PRODUCT CO., LTD.
2018	Executive Officer
Managing Director, THAI TOKAI CARBON PRODUCT CO., LTD.
2019	Member of the Board/Executive Officer
Director, TCCB Genpar LLC (incumbent)

1985	Joined the Company
2012	General Manager, Sales Department, Graphite Electrode
Division2015	General Manager, Osaka Branch
General Manager, Nagoya Branch2016	General Manager, Marketing & Sales Department,
Carbon Black Division2017	Director and Deputy Managing Director,
THAI TOKAI CARBON PRODUCT CO., LTD.
2019	Executive Officer, Director and Deputy Managing Director,
THAI TOKAI CARBON PRODUCT CO., LTD.
2020	Executive Officer
General Manager, Carbon Black Division2020	Member of the Board/Executive Officer
General Manager, Carbon Black Division (incumbent)

Shunji
Yamamoto

Hirofumi
MasudaMember of the Board
Executive Officer

Member of the Board
Executive Officer

Nobumitsu
Kambayashi
External Member of the Board
part-time

44

Career Summary

Career Summary

Career Summary

1971	Joined Kawasaki Heavy Industries, Ltd.
2002	Member of the Board, Kawasaki Shipbuilding Corporation2005	Managing Member of the Board, Kawasaki Shipbuilding
Corporation
2008	Managing Executive Officer, Kawasaki Heavy Industries, Ltd.
Member of the Board/Senior Vice President, Kawasaki Shipbuilding
Corporation2009	Managing Member of the Board, Kawasaki Heavy Industries, Ltd.
2010	President & Representative Member of the Board, Kawasaki
Shipbuilding Corporation
Managing Member of the Board (part-time), Kawasaki Heavy
Industries, Ltd.
2010	Managing Member of the Board (Representative Member ofthe Board), Kawasaki Heavy Industries, Ltd.
President, Ship & Offshore Structure Company
2013	Member of the Board, Kawasaki Heavy Industries, Ltd.
2013	Adviser, Kawasaki Heavy Industries, Ltd.
2015	Chairman, Japan Ship Technology Research Association (incumbent)
2016	Member of the Board, the Company (incumbent)
2017	Member of the Board, Inui Global Logistics Co., Ltd. (incumbent)

1981	Joined Nippon Chemical Industrial Co., Ltd.
1984	Member of the Board, Nippon Chemical Industrial Co., Ltd.
1986	Managing Member of the Board, Nippon Chemical IndustrialCo., Ltd.
1989	President, Nippon Chemical Industrial Co., Ltd.
2005	Chairman, Nippon Chemical Industrial Co., Ltd.
2005	Advisor, Japan Inorganic Chemical Industry Association(incumbent)
2009	Outside Member of the Board, Fuji Chemical Co., Ltd.
(incumbent)
2014	Vice President, The Association of Powder Process Industry andEngineering, JAPAN2015	Chairman of the Board, Nippon Chemical Industrial Co., Ltd.
2020	External Member of the Board, the Company (incumbent)
2020	Inspector, The Association of Powder Process Industry andEngineering, JAPAN (incumbent)
2021	Advisor, Nippon Chemical Industrial Co., Ltd. (incumbent)

TOKAI CARBON INTEGRATED REPORT 2020

JunichiTanahashi
External Member of the Board
part-timeINTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Career Summary

Mayumi
Asada
External Member of the Board
part-time

2002	Registered as an attorney-at-law and joined Hiranuma Takaaki
Law Office
2003	Transferred to Akagi & Matsuoka Law Office2013	Member of the committee for medical dispute settlement, theTokyo Metropolitan Medical Association (incumbent)
2014	Representative, Marunouchi Building Aoi Law Office(incumbent)
2014	Acquired Doctor’s degree in Medicine at the Juntendo
University Graduate School of Medicine
2015	Member of the council for disclosure and personal information
protection, Meguro-ku (incumbent)
2017	Member of the external audit committee for medical safety at
Juntendo University Hospital (incumbent)
2018	Reconciliation officer at Tokyo Family Court (incumbent)
2020	Business Director, Incorporated Educational Institution Nikaido
Gakuen (incumbent)
2021	External Member of the Board, the Company (incumbent)
2021	Part-time lecturer, Department of Hospital Administration,
Juntendo University School of Medicine (incumbent)

Audit & Supervisory Board Members

Masanao
HosoyaAudit & Supervisory
Board Member (full-time)

Career Summary

Career Summary

1979	Joined The Mitsubishi Bank, Ltd.
(currently The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
2008	Advisor, the Company
2008	Executive Officer
2009	Executive Officer
General Manager, Corporate Administration Division2010	Member of the Board/Executive Officer in charge of Corporate
Administration Division
General Manager, Corporate Administration Division2015	Member of the Board/Managing Executive Officer
General Manager, Corporate Administration Division2017	Member of the Board/Managing Executive Officer
Responsible for Accounting & Finance Department andInformation System Department
2019	Member of the Board/Managing Executive Officer
Responsible for Accounting & Finance Department andInformation System Department
2019	Audit & Supervisory Board Member (full-time) (incumbent)

1975	Joined Toyo Carbon Co., Ltd. (currently the Company)
2001	General Manager, Production & Technology Department,
Fine Carbon Division
2004	General Manager, Tanoura Plant
2009	General Manager, Shonan Office
General Manager, Chigasaki Plant
Industrialization Group Manager, R&D Strategy Division2009	Assistant to General Manager, Fine Carbon Division2009	Assistant to General Manager, R&D Strategy Division2010	General Manager, R&D Planning Department,
R&D Strategy Division2010	Member of the Board, Tokai Konetsu Kogyo Co., Ltd.
2015	Managing Executive Officer, Tokai Konetsu Kogyo Co., Ltd.
2016	Audit & Supervisory Board Member
2018	Audit & Supervisory Board Member (full-time)2019	Audit & Supervisory Board Member
2019	Audit & Supervisory Board Member (full-time) (incumbent)

Kazuyuki
Kakehashi
Audit & Supervisory
Board Member (full-time)

Career Summary

Career Summary

1990	Joined Shin Nihon Shoken Chosa Center Keiei Kenkyusho(currently Japan Investor Relations and Investor Support, Inc.)
1992	Registered as a certified tax accountant (to present)
2005	Auditor, Senkon Logistics Co., Ltd.
2017	Outside Member of the Board and Auditor, the Company(incumbent)
2019	Audit & Supervisory Board Member, the Company (incumbent)

1977	Joined Dainichiseika Color & Chemicals Mfg. Co., Ltd.
2014	Manager, Corporate Finance & Accounting Department,
Dainichiseika Color & Chemicals Mfg. Co., Ltd.
2015	General Manager, Corporate Finance & Accounting Division,
Dainichiseika Color & Chemicals Mfg. Co., Ltd.
2019	Retired Dainichiseika Color & Chemicals Mfg. Co., Ltd.
2020	Audit & Supervisory Board Member, the Company (incumbent)

Kaoru
Ogashiwa

Motokazu
Hiura

External Audit &Supervisory Board Member(Part-time)

External Audit &Supervisory Board Member(Part-time)

Executive Officers

Hiroshi Takahashi

Koji Miura

Akira Yamada

Executive Officer
CEO & Chairman of the Board,
Tokai Carbon Korea Co., Ltd.

Executive Officer
General Manager, Chita Laboratory

Executive Officer
General Manager, General Affairs Department;
General Manager, Legal Affairs Department

Takashi Masaki

Kenji Enokidani

Executive Officer
General Manager, Smelting and Lining Division
Chairman of the Board, Tokai COBEX GmbH

Executive Officer
General Manager, Graphite Electrode Division
Chairman of the Advisory Board, Tokai ErftCarbon GmbH
Chairman of the Board, Tokai Carbon GE LLC

Kazuhito Kataoka

Takeshi Nakashima

Executive Officer
General Manager, Japan Operations ofGraphite Electrodes

Executive Officer
Strategic Integration Officer, Tokai COBEX GmbH

Akihiko SatohExecutive Officer
Responsible for Accounting & Finance Department
and Information System Department,
and General Manager,
Accounting & Finance Department

TOKAI CARBON INTEGRATED REPORT 202045

Financial Strategy
Basic Financial Strategy
Our basic financial strategy is to secure liquidity to support our diverse business portfolio and its growth strategy, and tomaintain a sound financial base. In addition, we will take a steady and flexible approach to financing, using cash on hand andoperating cash flow to fund investment in growth as a principle, and for funding needs that exceed this, we will procure stablemedium- to long-term funding from the financial and capital markets to avoid concentration of maturity dates and ensure that
we are able to take advantage of growth opportunities. Furthermore, as part of our liquidity management efforts, we plan tomaintain enough liquidity to cover unforeseen events, such as financial crises and major natural disasters, with respect to debt
maturing within one year.
Policy for Maintaining Financial Soundness

1

2

3

4

Strengthen financialbase and maintain rating(R&I A-)

Secure long-term stable
funding and maintain
access to financial andcapital markets

Maintain liquidity andreduce refinancing risk

Global capitalmanagement andoptimization ofcapital efficiency

Expanding on-hand liquidity

Savoie in 2020, we proactively used hybrid financing, which

To improve our resilience to uncertainties stemming fromfinancial soundness and boosted our creditworthiness

the COVID-19 pandemic, we keep a close eye on our cashby obtaining an equity classification from Rating andposition and the financial market environment, and ensure

Investment Information, Inc.

carries both equity and debt characteristics, and secured

sufficient liquidity by maintaining a high cash position. As weawait greater clarity in the market environment, we have been
expanding our on-hand liquidity (cash and deposits + shortterm liquidity), which has tripled in the last three years. In
addition, we have introduced the Global Cash Management

Aiming for a net debt-to-equity ratioof 0.0x

System (GCMS), our in-house banking function, to manage

Under our medium-term management plan, T-2023, we aim

the cash position of the entire Group, thereby optimizing

to generate a total of ¥150 billion in operating cash flow

cash efficiency and reducing financial costs.

over three years and improve capital efficiency through(billions of yen)

2017/122018/122019/122020/12

Short-term liquidity (unused)

24.0

34.0

42.0

78.0

Cash and deposits

22.2

46.8

52.7

67.2

On-hand liquidity ratio (times)

2.5

2.4

2.4

4.0

* On-hand liquidity ratio: Liquidity on hand (cash + deposits) / monthly sales (net sales /duration of consolidated accounting period in months)

sustained profit growth. At the same time, we will increase
our investment capacity for the future while securingliquidity on hand and reducing debt to achieve a net cash
position. In addition, we will work to generate more cash bystrengthening the profitability of our core businesses andfocusing on prudent cash management. As a result of these
efforts, we expect to lower our net debt-to-equity ratio from
0.2x to 0.0x.

Maintaining financial discipline withhybrid financing
We carried out M&A deals of about ¥180 billion in total overthe four-year period leading up to 2020. In particular, when
acquiring shares in Tokai COBEX in 2019 and Tokai COBEX

46

TOKAI CARBON INTEGRATED REPORT 2020

(billions of yen)
2017/122018/122019/12

(6.0)

2.9

70.3

56.5

Adjusted shareholders’ equity

126.4

187.1

236.8

236.3

Adjusted net debt-to-equity (times)(0.047)

0.016

0.297

0.239

Adjusted net interest-bearing debt

2020/12* Adjusted net debt-to-equity: Net debt-to-equity that takes into account the equity
classification of hybrid financing obtained from rating agencies.

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Financial Section & Corporate Data

Foundation that Supports Corporate Value

Capital investment plan
Under T-2023, we plan to invest a three-year total of ¥66 billion (¥65 billion for the three-year period through 2020), mainly forfacility upgrades, environmental equipment, and investment in growth. The breakdown is as follows.

Major capital investment plans
Estimatedinvestment(3-year total)

Equipment renewal
and maintenance¥29.0 billion

Overall optimization¥10.0 billion

Facility expansion¥6.0 billion

Environmental
investment¥16.0 billion

Other¥5.0 billion

Total¥66.0 billion

EstimatedamountBusiness2021(billions of yen)

2022

2023

Graphite Electrodes

8.0

Renewal investment (productivity improvements)

Carbon Black

7.0

Renewal investment (productivity improvements)

Fine Carbon

9.0

Major repairs

Smelting and Lining

5.0

Productivity improvements

Graphite Electrodes

7.0

Establish optimal production system for the Group

Smelting and Lining

3.0

Eliminating bottlenecks

Fine Carbon

5.0

Expansion of materials, CVD-SiC furnaces, and high purification furnaces

Industrial Furnaces, etc.

1.0

Facility enhancements

Graphite Electrodes

2.0

Continuous investment to reduce environmental impact

Carbon Black

10.0

North America and EPA compliance

Fine Carbon

2.0

Smelting and Lining

2.0

Installation of exhaust gas facilities, etc.

5.0

Development, software, etc.

—

South Korea, etc.

¥25.0 billion¥24.0 billion¥17.0 billion

Note: This investment plan does not include the capital investment plan associated with developing the Anode Materials business in Europe.

Stable and continuous shareholder returns
Our basic policy for shareholder returns is to pay stable

will be brought down to our target level of 30% fromand continuous dividends while targeting a payout ratio

2022 onward. In addition, we will flexibly carry out shareof 30%. Our forecast of annual dividend FY2021 is ¥30

repurchases as a part of our shareholder return policy,

per share, the same amount as FY2020. As we expect ataking into account the management environment,

full-fledged recovery in the global economy, along withfinancial environment, investment for growth, stock price,an increase in net income per share, our consolidated

and other factors in a comprehensive manner.

dividend payout ratio, which is temporarily high today,

Fiscal year

2015

2016

2017

2018

2019

2020

2021
(forecast)

Dividend per share (yen)

6

6

12

24

48

30

30

Dividend payout ratio

52%

—

21%

7%

32%

627%

71.2%

TOKAI CARBON INTEGRATED REPORT 202047

Long-Term Earnings Summary (2010–2020)(Millions of yen)

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Net sales

107,679

104,924

98,704

100,935

114,576

104,864

88,580106,252

231,302

262,028

201,542

Gross profit

24,34823,95818,56015,267

18,651

19,96016,52927,451

99,37892,84049,555

Selling, generaland administrative
expenses

13,773

13,491

12,85913,611

14,947

15,871

15,39816,35826,31238,495

41,696

Operating income

10,575

10,467

5,700

1,655

3,703

4,088

1,131

11,09373,06554,344

7,858

Ordinary income

9,854

10,104

6,470

3,114

4,180

4,317

1,702

12,85572,991

52,986

6,262

Net income before
income taxes

9,211

9,336

3,992

2,926

4,345

6,726

(7,938)15,533

95,811

51,226

6,116

Income taxes

3,232

2,937

2,142

1,802

1,749

4,345

(67)

2,740

21,543

17,1752,283

Net income

5,630

6,119

1,993

1,213

2,562

2,484

(7,929)12,60374,26834,050

3,833

EBITDA

19,35718,92316,084

12,47013,845

14,581

10,616

17,74085,13077,05335,262Gross profit

22.6

22.8

18.8

15.1

16.3

19.0

18.7

25.8

43.0

35.4

24.6

Selling, generaland administrative
expenses

12.8

12.9

13.0

13.5

13.0

15.1

17.4

15.4

11.4

14.7

20.7

Operating income ROS

9.8

10.0

5.8

1.6

3.2

3.9

1.3

10.4

31.6

20.7

3.9

Ordinary income

9.2

9.6

6.6

3.1

3.6

4.1

1.9

12.1

31.6

20.2

3.1

Net Income before
income taxes

8.6

8.9

4.0

2.9

3.8

6.4

(9.0)

14.6

41.4

19.5

3.0

Net income

5.2

5.8

2.0

1.2

2.2

2.4

(9.0)

11.6

32.1

13.0

1.9

EBITDA

18.0

18.0

16.3

12.4

12.1

13.9

12.0

16.7

36.8

29.4

14.3

Capital expenditure

6,710

13,975

12,287

9,007

6,830

5,301

6,013

4,282

11,794

24,341

28,873

Depreciation

8,853

8,286

8,712

8,656

8,629

9,242

8,124

6,647

10,39018,503

20,890R&D expenses

2,012

1,956

1,961

1,800

1,882

1,822

2,249

1,482

1,883

2,460

2,682

Cash flow fromoperating activities

18,586

12,771

8,828

11,606

11,983

20,613

17,505

10,543

44,10941,66455,022

Cash flow investment
activities(6,088)(10,666)(12,770)(10,791)(24,027)3,189(3,622)(14,039)(53,849)(99,159)(44,301)

Free cash flows

12,4982,105(3,941)815(12,043)

23,802

13,883(3,496)(9,740)(57,495)

10,721

Cash flow fromfinancing activities(6,795)2,629(3,611)

1,441

9,728

(14,926)(7,613)(4,534)29,67764,568927

Increase (decrease)in cash and cash
equivalents

5,027

4,560

(6,674)

4,155(1,307)

8,180

5,602

(6,376)

18,9795,318

11,284

Exchange rate
(USD/JPY)

87.81

79.84

79.82

97.65

105.85121.05108.85112.19110.43109.05106.82

Consolidated
Statements of Income

Sales ratio (%)

Investment-related

Cash flow*Corporate exchange rate
*Figures have been revised retrospectively.

48

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Financial Section & Corporate Data

Foundation that Supports Corporate Value(Millions of yen)

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Total current assets

81,68488,42186,87990,984

94,68587,96877,64585,444

164,220

196,446

177,678

On-hand liquidity

12,076

16,572

11,891

16,04814,862

23,04528,52822,152

46,797

52,69567,174

Accounts receivables

31,49428,54328,25930,07533,972

26,897

24,22030,265

55,13750,64841,438Inventory

33,86837,97942,99341,507

41,29934,253

20,73427,56458,78986,38063,797

Other current assets

4,245

5,325

3,734

3,352

4,551

3,771

4,162

5,463

3,945

6,722

5,266

73,61973,142

79,78892,443

115,753

96,106

81,17899,286

165,648

266,425

282,03150,91655,166

58,16961,98567,581

56,62943,12251,40580,312

101,343

125,007

Intangible fixed
assets

490

382

438

464

14,103

11,324

10,534

16,34361,805

141,966

133,349

Investment andother assets

22,212

17,593

21,17929,99434,06928,15327,521

31,537

23,52923,11523,674

Total assets

155,304

161,563

166,668

183,427

210,439

184,074

158,824

184,730

329,868

462,872

459,709

Total current liabilities

28,62545,43938,05042,38544,897

31,12629,02836,87091,654

117,541

92,656

Short-term interestbearing liabilities

6,272

19,471

14,636

20,71821,576

9,537

12,91014,07441,70968,36351,878

Accounts payables

15,051

16,05916,145

14,17916,051

11,397

9,591

14,52226,001

28,936

18,647

Other current
liabilities

7,301

9,907

7,268

7,488

7,269

10,191

6,525

8,274

23,944

20,241

22,129Total long-term
liabilities

21,072

8,901

15,351

17,80933,19827,976

16,806

20,72830,381

112,355

142,237

Long-term interestbearing liabilities

12,162

1,747

6,191

5,044

16,713

14,398

4,137

2,068

8,000

79,666

106,764

Other long-term
liabilities

8,910

7,154

9,160

12,765

16,484

13,577

12,66918,66022,381

32,68935,473

Total liabilities

49,69854,34053,40160,19578,096

59,10345,83457,599122,035

229,896234,894

Total net assets

105,605

107,223

113,266

123,232

132,343

124,971

112,989

127,130

207,833

232,975

224,815

Shareholder’s capital 102,200

106,606

106,887

106,807108,006

108,910

99,693110,089

179,500

203,819

196,543

155,304

161,563

166,668

183,427

210,439

184,074

158,824

184,730

329,868

462,872

459,709

ROA

6.4

6.4

3.9

1.8

2.1

2.2

1.0

7.5

30.0

13.4

1.4

ROE

5.4

5.9

1.9

1.0

2.0

2.0

(6.8)

10.4

46.8

16.0

0.5

Capital-to-asset ratio

66.6

64.5

66.1

66.0

61.8

66.8

69.9

68.4

56.7

45.8

43.8

EPS (JPY)

26

29

9

6

12

12

(37)

58

344

150

45

BPS (JPY)

485

488

516

567

610

577

521

593

878

994

999

Dividend (JPY)

8

8

7

6

6

6

6

12

24

48

30

Dividend payout ratio (%)

31

28

75

106

50

52

—

21

7

32

627

Consolidated
Balance Sheet

Total fixed assets
Tangible fixed assets

Total liabilities andnet assets
Ratio analysis (%)

Indicator per share

TOKAI CARBON INTEGRATED REPORT 2020

49

Financial Statements
Consolidated Balance Sheets(Millions of yen)

FY2019FY2020AssetsCurrent assets

52,69567,174

Notes and accounts receivable* 50,648* 41,438

Merchandise and finished goods

20,227

14,890Work in progress

35,11630,638Raw materials and supplies

31,036

18,269

Other

6,971

5,490

Cash and cash equivalents

4

4

(248)

(224)

196,446

177,678

Buildings and structures, net

23,09225,150Machinery, equipment, and vehicles, net

42,13951,515

Furnaces, net

4,700

8,354

Land

7,315

7,604

Construction in progress

17,792

24,672

Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets

Other, net
Total tangible fixed assets

6,302

7,709

*1 101,343*1 125,007

Intangible fixed assets
Software

1,728

2,015

Goodwill

64,54360,316

Customer-related assets

67,49462,438

Other

8,200

8,579

141,966

133,349*2 18,842*2 17,492

Total intangible fixed assets
Investments and other assets
Investment securities

2,633

2,729

Deferred tax assets

997

2,611

Other

693

890

Allowance for doubtful accounts

(50)

(50)

23,11523,674266,425

282,031462,872

459,709

Net defined benefit asset

Total investments and other assets
Total fixed assets
Total assets*1 The cumulative amount of depreciation of tangible fixed assets is as follows.

50

FY2019FY2020¥ 253,854 million¥ 276,430 million

TOKAI CARBON INTEGRATED REPORT 2020

*2 Items associated with affiliates are as follows.

Investment securities (Shares)

FY2019FY2020¥ 791 million¥ 835 million

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Financial Section & Corporate Data

Foundation that Supports Corporate Value(Millions of yen)

FY2019FY2020*4 24,857*4 4,0783* 37,530
30,000
833
3,658
359
2,813
1,550
*4 11,859
117,541*4 15,500*4 3,147*3 3,065
40,000
8,813
3,094
289
2,880
1,754
*4 14,108
92,65635,00044,666
21,431
6,246
86
66
296
4,561
112,355
229,896

55,00051,764
21,409
7,544
82
73
431
5,932
142,237
234,894

20,436
17,333
173,310(7,260)203,819

20,436
17,338166,017(7,248)
196,543

8,415
34(1,671)
1,239
8,019
21,137
232,975
462,872

7,436(70)(3,529)887
4,723
23,548224,815459,709

Liabilities
Current liabilities
Notes and accounts payable
Electronically recorded obligations
Short-term borrowings
Commercial paper
Current portion of long-term debt
Income taxes payable
Consumption taxes payable
Accrued expenses
Reserve for bonuses
Other
Total current liabilities
Fixed liabilities
Corporate bonds
Long-term debt
Deferred tax liabilities
Net defined benefit liability
Reserve for directors’ retirement benefits
Reserve for executive officers’ retirement benefits
Provision for environment and safety measures
Other
Total fixed liabilities
Total liabilities
Net assets
Shareholders’ capital
Common stock
Additional paid-in capital
Retained earnings
Treasury stock
Total shareholders’ capital
Other accumulated comprehensive income
Net unrealized gains/losses on other securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Cumulative remeasurements of defined benefit plans
Total other accumulated comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets*3 Overdraft facility agreements and commitment line agreements
The Company has overdraft facility agreements and loan commitment contracts with nine financial institutions to facilitate the efficient procurement of working capital. At the endof the consolidated fiscal year, the balance of unexecuted loans under these agreements was as follows.

Total value of overdraft limits and loan commitment contracts

FY2019FY2020¥ 40,000 million¥ 62,000 million

Executed loans

16,0002,000

Unused balance

24,00060,000*4 Notes and electronically recorded obligations maturing at end of fiscal year
Notes and electronically recorded obligations maturing at the end of the fiscal year are accounted for as if they had been settled on their maturity dates.

TOKAI CARBON INTEGRATED REPORT 202051

Financial Statements

Consolidated Statement of Operations(Millions of yen)

FY2019FY2020262,028

201,542

Cost of sales*1, *4 169,188*1, *4 151,987

Gross profit

92,84049,555*2 10,418*2 9,852*3, *4 28,076*3, *4 31,843

38,495

41,69654,344

7,858Interest income

289

214

Dividend income

558

514

Equity in income of non-consolidated subsidiaries
and affiliates

123

124

Other

770

782

1,741

1,636

536

952

Net sales

Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income

Total non-operating income
Non-operating expenses
Interest expenses

344

282

Other

2,218

1,997

Total non-operating expenses

3,099

3,232

52,9866,262—*5 1,067* 56*6 76953—

Foreign exchange losses

Ordinary income
Extraordinary income
Insurance claim income
Gain on sales of fixed assets
Gain on termination of retirement benefit program

6

Gain on liquidation of subsidiaries and affiliates

23—

Total extraordinary income

133

1,836

Loss on disaster—*5 1,337

Impairment loss

*7 1,314*7 643

Loss on sales of fixed assets

8

* 3

*8 1

Loss on disposal of fixed assets

576—

Extraordinary losses

52

Total extraordinary losses

1,894

1,983

Net income before income taxes

51,226

6,116

Income taxes, inhabitants tax, and enterprise taxes

20,456

6,136

Income tax adjustments(3,280)(3,852)

Total Income taxes

17,1752,283

Net income

34,0503,833

Net income attributable to non-controlling interests

2,056

2,813

Net income attributable to owners of the parent

31,994

1,019

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation*1	Inventories at the end of the fiscal year are shown after reductions
in book values to reflect declines in profitability, and the following
inventory valuation losses are included in the cost of sales.
FY2019FY2020¥ 1,980 million¥ 3,162 million

Financial Section & Corporate Data

Foundation that Supports Corporate Value*2	Major items included in selling expenses and their amounts are as
follows.

Warehousing and shipping expenses

FY2019FY2020¥ 7,955 million¥ 8,428 million

Selling expenses

2,155

1,421

*3 Major items included in general and administrative expenses and their amounts are as follows.

Salaries and allowances

FY2019FY2020¥ 6,718 million¥ 7,463 million

Additions to reserve for bonuses

375

209

Retirement benefit expenses

200

158

Additions to reserve for directors’ retirement benefits

1412Additions to reserve for executive officers’ retirement benefits

14

10

Depreciation and amortization

4,440

7,204

Research and development expenses

2,425

2,660

Amortization of goodwill

4,205

6,512

794

754

Rent expenses*4 Total amount of research and development expenses included in general and administrative expenses and production costs
FY2019FY2020¥ 2,460 million¥ 2,682 million*5 Insurance claim income and loss on disaster
Previous fiscal year (January 1, 2019 to December 31, 2019)
Not applicable.
Current fiscal year (January 1, 2020 to December 31, 2020)
Expenses required for the dismantling, removal and restoration of production facilities at the Tanoura Plant, which was damaged by the heavy rain disasterthat occurred in July 2020, and losses due to damage to inventories, etc. are recorded in “Loss on disaster.” Moreover, casualty insurance money received
is recorded in “Insurance claim income.”*6 Gains (losses) on sales of fixed assets were as follows.
FY2019FY2020

Buildings¥ 5 million

Transport equipment10¥ 1 million
15

Land

35

751

Other

4

2

Total

56

769

*7 Impairment loss
The Group recorded impairment losses with respect to the asset groups below. For more details, please refer to pages 81-82 of the FY2020 Securities Report.
https://contents.xj-storage.jp/xcontents/AS04435/b217c537/6644/4912/bc02/e811f08ac71e/20210512103733748s.pdf
Use

Type

Company nameLocation

Impairment loss (Millions of yen)

Idle asset

Buildings and structures
Land
Other

Tokai Carbon Co., Ltd.

Ishinomaki-shi, Miyagi

129

Idle asset

Buildings and structures
Land

Tokai Carbon Co., Ltd.

Gotemba-shi, Shizuoka

387

Idle asset

Buildings and structures
Land

Tokai Carbon Co., Ltd.

Taketoyo-cho, Chita-gun, Aichi

9

Idle asset

Buildings and structures
Land

Tokai Carbon Co., Ltd.

Kitakyushu-shi, Fukuoka

117*8 Losses on sales of fixed assets were as follows.
FY2019Machinery and equipment¥ 0 million

FY2020¥ 1 million

Other

2

0

Total

3

1

TOKAI CARBON INTEGRATED REPORT 202053

Financial Statements

Consolidated Statements of Cash Flows(Millions of yen)

FY2019FY2020Cash flows from operating activities
Net income before income taxes

51,226

6,116

Depreciation and amortization

18,503

20,890

Impairment loss

1,314

643

Loss (gain) on liquidation of subsidiaries and affiliates

(23)

—

Loss (gain) on sales of tangible fixed assets

522

(767)

4,205

6,512

Amortization of goodwill
Gain on termination of retirement benefit program

(53)

—

Increase (decrease) in allowance for doubtful accounts

(480)

(28)

0

270

Increase (decrease) in net defined benefit liability

2,514

168

Decrease (increase) in net defined benefit asset

(637)

(96)

Increase (decrease) in provision for environmentand safety measures

(281)

(200)

Interest and dividend income

(847)

(728)

Interest expenses

536

952

Foreign exchange gain (losses)

108

36

Equity in losses (income) of non-consolidated subsidiaries
and affiliates

(123)

(124)

—

(1,067)

Increase (decrease) in reserve for bonuses

Insurance claim income
Loss on disaster
Decrease (increase) in trade receivables
Decrease (increase) in inventories

1,337
10,463(19,778)

26,145—

3,084

Increase (decrease) in trade payables

730(9,430)

Increase (decrease) in accrued expenses

(88)

(246)

Increase (decrease) in accounts payable-other

(61)

97

Decrease (increase) in short-term guarantee deposits

Decrease (increase) in advance payments

1,732

(9)

Increase (decrease) in accrued consumption taxes(419)(1,639)65

134

67,28762,514

Other
SubtotalInterest and dividends received

891

798

Interest paid

(552)

(1,015)—

1,067

Proceeds from insurance income

—

(244)

Income taxes paid

(25,961)(8,098)Net cash provided by (used in) operating activities

41,66455,022

Payments associated with disaster loss

54

—
8,623

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Financial Section & Corporate Data

Foundation that Supports Corporate Value(Millions of yen)

FY2019FY2020Cash flows from investing activities
Payments into time deposits(6,243)(8,992)

Proceeds from withdrawal of time deposits

5,399

5,986

(23,984)(26,839)

Proceeds from sales of tangible fixed assets

150

1,165

Purchase of intangible fixed assets

(649)

(391)

*2 (73,643)*2 (15,229)

(187)

0

(99,159)(44,301)

Net increase (decrease) in short-term borrowings(1,975)(33,167)

Net increase (decrease) in commercial paper

Purchase of tangible fixed assets

Purchase of shares of subsidiaries resulting in change inscope of consolidation
Other
Net cash provided by (used in) investing activities

Cash flows from financing activities

30,00010,000

Proceeds from long-term debt

37,50015,015

Repayment of long-term debt

(27,302)(1,415)

Proceeds from issuance of bonds

35,00020,000

Repayments of finance lease obligations
Dividends paid
Dividends paid to non-controlling interests
Other

(371)

(600)

(7,673)(8,313)

(666)

(608)

57

17

64,568927

Effect of exchange rate changes on cash and cash equivalents(1,754)(364)

Increase (decrease) in cash and cash equivalents

5,318

11,284

Net cash provided by (used in) financing activities

41,12446,443* 46,443* 57,727

Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

1

1

TOKAI CARBON INTEGRATED REPORT 202055

Financial Statements*1 Reconciliation of balance of Cash and cash equivalents at the end of the period and those on consolidated balance sheet

Cash and cash equivalents

FY2019FY2020¥ 52,695 million¥ 67,174 million

Time deposits with original maturities of more than three months(6,251)(9,446)

Cash and cash equivalents

46,44357,727*2 Principal assets and liabilities of companies that became consolidated subsidiaries due to share acquisitions
Previous fiscal year (January 1, 2019 to December 31, 2019)
Principal assets and liabilities of Tokai COBEX HoldCo GmbH upon consolidation of the company along with its three group companies resulting fromacquisition of its shares, as well as the relationship between the acquisition price of the shares of the company and expenditures (net) for its acquisition are
as follows.
Current assets¥ 22,281 million

Fixed assets

59,907

Goodwill

39,496

Current liabilities(8,697)

Fixed liabilities(37,356)

Foreign currency translation adjustments
Acquisition price for shares of Tokai COBEX HoldCo GmbH165
75,797

Cash and cash equivalents of Tokai COBEX HoldCo GmbH

(2,153)

Net: Funds used for acquisition of shares of subsidiaries resulting in a change in the scope of consolidation

73,643

The above figures are amounts reflecting the significant revision of the initial allocation amount of acquisition costs due to finalization of provisional
accounting treatments for the business combination.
Current fiscal year (January 1, 2020 to December 31, 2020)
Principal assets and liabilities of Carbone Savoie International SAS upon consolidation of the company along with its one subsidiary resulting from acquisitionof its shares, as well as the relationship between the acquisition price of the shares of the company and expenditures (net) for its acquisition are as follows.
Current assets
Fixed assets

11,706

Goodwill

1,429

Current liabilities(3,243)Fixed liabilities(3,086)

Foreign currency translation adjustments
Acquisition price for shares of Carbone Savoie International SAS

56¥ 13,469 million

320,278Cash and cash equivalents of Carbone Savoie International SAS

5,049

Net: Funds used for acquisition of shares of subsidiaries resulting in a change in the scope of consolidation

15,228TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Company Overview

Trade NameTOKAI CARBON CO., LTD.

Head Office

Aoyama Building, 1-2-3 Kita-Aoyama, Minato-ku, Tokyo 107- 8636, Japan
Tel: +81-3-3746-5100 (Switchboard)

Established

1918

President & CEO

Hajime Nagasaka, President and CEO

Fiscal YearEnding December 31

Capital Stock

20,436 million yen (as of December 2020)

Number of Employees

778 (4,178 consolidated) (as of December 2020)

Operations

Manufacture and sales of, Graphite Electrodes, Carbon Black, Fine Carbon,
Smelting and Lining, Friction Materials, Anode Materials,
Industrial Furnaces and Related Products
Head Office: TokyoResearch Laboratory : Fuji (Shizuoka), Chita, Hofu
Offices

Sales Branch: Osaka, Nagoya

Plant: Ishinomaki, Shonan, Chita, Shiga, Hofu,
Production Technology Center, Kyushu-Wakamatsu, Tanoura

Main Banks

Bank of Tokyo-Mitsubishi UFJ

TOKAI CARBON INTEGRATED REPORT 202057

Group Companies

Tokai Carbon (Tianjin) Co., Ltd
Tokai Konetsu (Suzhou) Co., Ltd.
Tokai Carbon (Suzhou) Co., Ltd.
Shanghai Tokai Konetsu Co., Ltd.
Tokai Carbon (Dalian) Co., Ltd.
THAI TOKAI CARBON PRODUCT CO., LTD.
Tokai Carbon Korea Co., Ltd.

SCHUNK TOKAI SCANDINAVIA AB
TOKAI CARBON ITALIA S.R.L.
TOKAI CARBON DEUTSCHLAND GmbHTOKAI ERFTCARBON GmbHTOKAI CARBON EUROPE GmbHTOKAI CARBON EUROPE LTD.
Tokai COBEX GmbH
Tokai COBEX Savoie SAS
Tokai COBEX Polska sp.zo.o

TOKAI CARBON U.S.A., INC.
MWI, INC.
TOKAI CARBON US HOLDINGS INC.
Cancarb Limited
TOKAI CARBON GE LLC
Tokai Carbon CB Ltd.

Chita Plant
Chita Laboratory
Nagoya Branch
Tokai Konetsu Engineering Co., Ltd.
Shiga Plant
Osaka Branch
Hofu Plant
Hofu Laboratory
Production Technology Center
Kyushu-Wakamatsu Plant
Tanoura Plant

Tokai Noshiro Seiko Co., Ltd.
Tokai Unyu Co., Ltd. Ishinomaki Office
Ishinomaki Plant
TOKAI CARBON Head OfficeFuji Research Laboratory
Shonan Plant
Oriental Sangyo Co., Ltd.
Mitomo Brake Co., Ltd.
Tokai Fine Carbon Co., Ltd.
Tokai Konetsu Kogyo Co., Ltd.
Tokai Material Co., Ltd.

58

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Foundation that Supports Corporate Value

Financial Section & Corporate Data

Tokai Unyu Co., Ltd. Ishinomaki
OfficeIndustrial Furnaces andRelated Products Division

Minato-ku, Tokyo

Ishinomaki, Miyagi

Laboratory

Tokai Carbon CB Ltd.

Tokai Konetsu Kogyo Co., Ltd.
Head Office

TOKAI CARBON Fuji ResearchLaboratory

Fort Worth, U.S.A.

Minato-ku, Tokyo

TCCB US Ltd.

Tokai Konetsu Engineering Co., Ltd.

Sunto-gun, Shizuoka

Fort Worth, U.S.A.

Oumihachiman, Shiga

TOKAI CARBON Chita Laboratory

TCCB Genpar LLC

Shanghai Tokai Konetsu Co., Ltd.

Chita-gun, Aichi

Fort Worth, U.S.A.

Shanghai, China

TOKAI CARBON Hofu Laboratory

Cancarb Limited

Tokai Konetsu (Suzhou) Co., Ltd.

Hofu, Yamaguchi

Medicine Hat, Canada

Suzhou, China

BranchTHAI TOKAI CARBONPRODUCT CO., LTD.

Smelting and Lining Division

Head Office

TOKAI CARBON JAPANTOKAI CARBON Osaka Branch
Kita-ku, Osaka

Bangkok, Thailand

TOKAI CARBON Nagoya Branch
Nagoya, Aichi

Tianjin, China

Tokai Carbon (Tianjin) Co., Ltd

Tokai COBEX HoldCo GmbH
Wiesbaden, Germany

Tokai COBEX GmbH
Wiesbaden, Germany

Fine Carbon Division
Graphite Electrodes Division

Tokai COBEX Polska sp.zo.o

TOKAI CARBON Tanoura Plant

Raciborz, Poland

TOKAI CARBON Shiga Plant

Ashikita-gun, Kumamoto

Tokai COBEX (shanghai) Ltd.
Beijing, China

TOKAI CARBON Hofu Plant

Tokai Fine Carbon Co., Ltd.
Head Office

Hofu, Yamaguchi

Chigasaki, Kanagawa

Notre-Dame de Briançon, France

TOKAI CARBON GE
HOLDING LLC

Oriental Sangyo Co., Ltd.

Oumihachiman, ShigaCharlotte, U.S.A.

TOKAI CARBON GE LLC
Charlotte, U.S.A.

TOKAI CARBON GE FUND CORP.
Charlotte, U.S.A.

TOKAI ERFTCARBON GmbH
Grevenbroich, Germany

Carbon Black Division

TOKAI CARBON Ishinomaki Plant

Kofu, Yamanashi

TOKAI CARBON U.S.A., INC.
Hillsboro, U.S.A.

MWI, INC.
Rochester, U.S.A.

TOKAI CARBON EUROPE GmbH
Grevenbroich, Germany

TOKAI CARBON EUROPE LTD.
West Midlands, U.K.

TOKAI CARBON ITALIA S.R.L.

Tokai COBEX Savoie SAS

Other Divisions

TOKAI CARBON Shonan Plant[Friction Materials Division]
Chigasaki, Kanagawa

TOKAI CARBON Production
Technology Center[Anode Materials Division]
Hofu, Yamaguchi

Tokai Material Co., Ltd.
Head Office/Plant[Friction Materials Division]
Yachiyo, Chiba

Ishinomaki, Miyagi

Milano, Italy

TOKAI CARBON Chita Plant
Chita-gun, Aichi

TOKAI CARBON
DEUTSCHLAND GmbHTOKAI CARBON
Kyushu-Wakamatsu Plant

Buchholz-Mendt, Germany[Friction Materials Division]Hiki-gun, Saitama

SCHUNK TOKAI SCANDINAVIA AB

Tokai Noshiro Seiko Co., Ltd.

Trollhättan, Sweden[Friction Materials Division]Noshiro, Akita

kita-Kyusyu, Fukuoka

Tokai Carbon (Dalian) Co., Ltd.

Mitomo Brake Co., Ltd.

Dalian, China

Tokai Carbon (Suzhou) Co., Ltd.

Tokai Carbon Korea Co., Ltd.

[Friction Materials Division]Suzhou, China

Anseong-si, Korea

Other

TOKAI CARBON US HOLDINGS INC.
Charlotte, U.S.A.

TOKAI CARBON INTEGRATED REPORT 2020

59

Stock Information

Stock Summary
Securities code

5301

Stock Exchange ListingFirst Section of Tokyo Stock Exchange, Inc.

Fiscal Yearfrom January 1 to December 31

General Meeting of Shareholders

March
General Meeting of Shareholders : December 31

Shareholder Record Date

Year-End Dividend of Surplus: December 31

Interim Dividend: June 30 (when applicable)

Share Unit

100 shares

Shareholder Registry Administrator

4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo
Mitsubishi UFJ Trust and Banking Corporation

Method of Public NoticeElectronic notice(If unavoidable circumstances prevent notice from being given electronically,
notice shall be posted in the Nikkei.)

Stock Figures(as of December 31, 2020)

Total number of shares issued
by the company

598,764,000

Total number of outstanding shares

224,943,104

Total number of shareholders

78,224

Major Shareholders(as of December 31, 2020)

Name

Number of shares held
(1,000 shares)

The Master Trust Bank of Japan, Ltd. (Trust Account)

25,726

12.07

Japan Custody Bank, Ltd. (Trust Account)

15,006

7.04

MUFG Bank, Ltd.

7,958

3.73

SMBC Nikko Securities Inc.

7,686

3.61

Mitsubishi Corporation

6,748

3.17

Mitsubishi UFJ Trust and Banking Corporation

6,290

2.95

The Master Trust Bank of Japan, Ltd.
(Mitsubishi Chemical Corp. Retirement Benefit Trust Account)

5,900

2.77

Japan Custody Bank, Ltd. (Trust Account 9)

3,149

1.47

Japan Custody Bank, Ltd. (Trust Account 5)

3,102

1.46

Japan Custody Bank, Ltd. (Trust Account 6)

2,801

1.31

Notes 1. Tokai Carbon holds 11,771,000 shares of treasury stock but has not been listed among the major shareholders above.
2. The shareholding ratio was calculated excluding treasury stock.

60

Shareholding ratio(%)

TOKAI CARBON INTEGRATED REPORT 2020

INTRODUCTION

Tokai Carbon Value Creation

Strategy for Value Creation

Share Owner Information

Financial Section & Corporate Data

Foundation that Supports Corporate Value(as of December 31, 2020)

Number of shares held
(1,000 shares)

Shareholder
Financial Institutions

93,753(44%)

Individuals/Others

59,878(28%)

Foreign Corporations, etc.

22,218(10%)

Japanese Corporations

21,528(10%)

Financial Instruments Business
Operators

15,792

(7%)

Total

213,171(100%)

Note The shareholding ratio was calculated excluding treasury stock.

Financial Instruments
Business Operators

7%

Financial Institutions 44%

Japanese Corporations 10%
Foreign
Corporations, etc. 10%

Shareholding ratio

Individuals/Others 28%

Dividend Policy• The Company regards returning profits to shareholders to be one of its important management priorities in its efforts
to increase corporate value over the medium and long term. Accordingly, the Company maintains its basic policy to pay
dividends stably and continuously with a consolidated payout ratio of 30% as a target, while giving consideration to its
operating results and forecasts, investment plans, and status of cash flows, etc. in each period.
• The Company’s basic policy is to distribute dividends of surplus twice a year: an interim dividend and a year-end dividend. The
decision-making body for such dividends of surplus is the General Meeting of Shareholders for the year-end dividend and theBoard of Directors for the interim dividend.
• Based on the policy outlined above, the Company decided to pay an annual dividend of ¥30 per share (including an interim
dividend of ¥15 per share) for the fiscal year under review.
• The Company plans to allocate retained earnings to investments in areas that could become sources of future value, such as
facility upgrades, environmental investments, growth-oriented investments, and strategic investments.
• The Company’s articles of incorporation stipulate that “An interim dividend may be distributed with a record date of June 30
every year by the resolution of the Board of Directors.”
Dividends per share and dividend payout ratio (consolidated)
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021*

Dividends per share (yen)

8

8

7

6

6

6

6

12

24

48

30

30

Dividend payout ratio (%)

30.7

27.9

74.9

105.6

50.0

51.5

—

20.7

7.0

32.0

627.0

71.2

* 2021 = Forecast as of February 2021

TOKAI CARBON INTEGRATED REPORT 202061

https://www.tokaicarbon.co.jp/en/
Aoyama Building, 1-2-3 Kita-Aoyama, Minato-ku, Tokyo 107-8636, Japan
Tel: +81-3-3746-5100 (Switchboard)