Corporate
Strategy

13

Picture of Value Creation

P15-16

1 Technological Prowess

P17-182 Management Strategy

P19-203 Reinvestment for GrowthP21-22

4 Business Area Expansion

P23-245 Business Composition

P25-26

Tokai Carbon Co., Ltd.

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Corporate Strategy

Corporate Strategy

Picture of Value Creation“Contribute to a sustainable society through advanced materials and solutions” ―― Our long-term
vision for 2030. Amid the trend toward carbon neutrality, this statement demonstrates our resolve toboldly take on the challenge of entering new business areas and clarifies the reason for the existenceof Tokai Carbon.

High Quality/Stable Supply

1

Technological
Prowess
Stable Cash Flow

Profit Generation

5

In order to realize our long-term vision, it is important toco-create with our stakeholders, including our customers
and business partners around the world. In this context,
we would like to play a role in global co-creation by
further combining our strengths.
In order to achieve this, it is a prerequisite for us tomeet the expectations of our stakeholders by maximizing
and expanding our technological capabilities basedon superior management strategies and governance.
“Reinvestment for Growth” and “Business Area
Expansion” are the means to achieve this, and they arealso the means to expand the areas in which we cancontribute. As a result, they promote the soundness of
our “Business Portfolio” and lead to a stable managementfoundation for the Company.
This cycle leads to the next stage of co-creationfrom which new value is created. We believe that Tokai
Carbon’s cutting-edge materials and solutions can makethis world more prosperous.

Business
PortfolioLong-Term Vision

Contribute to a sustainable
society through advanced
materials and solutions

4

Business Area
Expansion
Market Creation

15

Tokai Carbon Co., Ltd.

2

Management
Strategy

3

Reinvestment
for Growth
Empowering Growth Engine

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16

Corporate Strategy

Corporate Strategy

1 Technological Prowess

High Quality/Stable Supply
We cannot build a relationship of trust with our customers unless we can provide
a stable supply of high-quality products by making use of our sound technologicalprowess. Only when our technology is superior can we provide value to society.

Tokai Carbon was founded in 1918. We were the first Company in Japan to realize domestic production of highquality graphite electrodes. Graphite electrodes are indispensable for steelmaking, which was considered a national
industry. At present, we have been supplying the world’s top graphite electrodes from our plants in three countries to
EAF steel producers around the world.
In 1941, we began mass production of carbon black for the first time in Japan at the Kyushu-Wakamatsu Plant inFukuoka Prefecture. Since then, we have continued to grow and now support our customers in production by having
established plants in Japan, Thailand, and North America, where demand for tires is strong. Carbon black is a raw
material that determines tire performance and requires management of its characteristic conditions at the nano level.
We continue to respond to these demands and work to improve the product performance of tire manufacturers andthe mobility industry.
The Fine Carbon business has been developing in earnest since 1986 when the Tanoura Plant in Kumamoto
Prefecture became a dedicated fine carbon manufacturing plant. Utilizing the heat treatment technology cultivatedin our Graphite Electrode business, the Company has expanded its business to date meeting demand from generalindustries, aerospace, and semiconductor industries. Tokai Carbon is supporting the accelerating technologicalinnovation of semiconductors by advancing SiC coating technology.
The primary reason our products have been widely used by our customers over the years is their trust towards ourstable supply of high quality materials. By solving customers’ issues day by day, our core technologies have beenrefined ever since. Tokai Carbon’s core technologies continue to evolve also from the newly acquired technologies
through M&As and co-creation activities.

The Sources of Our Technological Prowess
Core Technology

Primary Products

Description

Heat Treatment

Graphite Electrodes
Fine Carbon
Smelting and Lining products
Anode Materials

Heat treatment technology for unique environments up to
3,000°C
Further evolution of technology through fusion with othercompanies’ technologies acquired through M&A, etc.

Industrial furnaces (nicheheat treatment furnaces)

Tokai Carbon holds the global top share in sintering furnaces
heated by electric furnaces and SiC heater materials

Carbon Black

Control of powder properties of nano-level particles andproduction of more than 60 varieties(for rubber products)

Surface Treatment

By developing surface treatment technology, the Company
succeeded in developing Aqua Carbon Black that can beused for pigment inks

Aqua Carbon Black(for pigment inks)

SiC Mass Production
Technology

World’s leading high-speed deposition-based SiC mass
production technology
Global top share of solid SiC production

SiC Coated Carbon
Solid SiC

Core Technologies That Continue toEvolve Locally
By developing and manufacturing products in
the regions where our customers operate, we arecommitted to long-term quality improvement andstable supply of products. In addition to grasping
the needs surrounding local production for local
consumption, we are also working to diversify
regional risks.
High-temperature heat treatment is a technology
common to our four main businesses. We havemultiple heat treatment facilities in Japan, the U.S.,
and Europe. Our Carbon Black business, which
employs surface treatment technology, has basesin the U.S., the region with the second highest levelof demand after China, as well as in Japan and
Thailand to meet demand in each region. Although
the SiC mass production technology possessed by
the Fine Carbon business was born from researchand development in Japan, it has grown significantly
by expanding it to the U.S., and South Korea where
semiconductor customers are concentrated.

17

Tokai Carbon Co., Ltd.

Graphite Electrodes

Tokai ErftCarbon
Fine Carbon

Tokai Carbon Deutschland
Smelting and Lining

Fine Carbon

Tokai Carbon Europe

Carbon Black

Tokai COBEX

Cancarb

Smelting and Lining

Fine Carbon

Tokai COBEX(Beijing)
Smelting and Lining

Tokai COBEX Polska
Fine Carbon

Tokai Carbon Korea Co., Ltd.

Fine Carbon

Tokai Carbon (Dalian) Co., Ltd.
Graphite Electrodes

MWI

Fine Carbon

Tokai Carbon U.S.A.

Hofu Plant/Shiga Plant

Graphite Electrodes
Carbon Black

Tokai Carbon CB

Industrial Furnaces and Related Products

Tokai Carbon GE
Smelting and Lining

Tokai COBEX Savoie

Shanghai Tokai Konetsu Co., Ltd.
Industrial Furnaces and Related Products

Tokai Konetsu (Suzhou) Co., Ltd.

Carbon Black

Ishinomaki Plant/Chita Plant/
Kyushu-Wakamatsu Plant
Fine Carbon

Tanoura Plant
Carbon Black

Thai Tokai Carbon ProductIndustrial Furnaces andRelated Products

Tokai Konetsu Kogyo Co., Ltd.

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Corporate Strategy

Corporate Strategy

2 Management Strategy

Profit Generation
We will realize a “stable supply of high-quality products” at sustainable manufacturing costs.
We will maximize profits by effectively investing management resources in the medium-term
management plan.

Tokai Carbon formulates its medium-term management plan on a rolling basis to prevent the plan and awareness frombecoming obsolete, updating the three-year forecast annually so that it can respond quickly and agilely to the rapidlychanging business environment.
Under the medium-term management plan “T-2025,” which covers the period from 2023 to 2025, we aim to achievesignificant increases in sales and profits. The net sales target for 2025, the final year of the plan, is 484 billion yen, whichis 1.4 times higher than in 2022, which will be a record high if achieved. The operating income target for 2025 is 69 billion
yen, 1.7 times higher than in 2022, the second highest level after 2018, the year when electrode price market conditions
were booming. As for EBITDA, the target for 2025 is 113 billion yen, 1.5 times higher than in 2022.
We will stabilize our earnings base by returning to the growth path of our core businesses, select and concentrate ourbusinesses in light of environmental changes, such as carbon neutrality and supply chains, and promote initiatives to build
a sustainability management foundation based on our long-term vision to achieve our goals.

Medium-term Management Plan “T-2025” Quantitative Targets

Net sales

Operating income

484 billion yen

ROS

EBITDA

69 billion yen

14 %113 billion yen(EBITDA margin: 23%)(billion yen)484

(billion yen)(%)

Measures for Each Business Segment
Business Segment

Main Market

Measures by Segment

Graphite Electrodes

Electric steelmaking
furnaces

Increase production capacity for super-size electrodes

Carbon Black

Tires

Stabilize operations at U.S. base by completing theimplementation of environmental measures

Fine Carbon

Semiconductors

Expand facilities to meet growing demand forsemiconductors

Smelting and Lining

Aluminum

Improve our ability to produce cathodes designed foraluminum smelting

Industrial Furnaces
and Related ProductsElectronics/Lithium-ion
batteries

Increase production capacity for industrial furnaces and
EREMA heating elements

113
14

340.4

EBITDA Growth Forecast by Business Segment

12

75.6

10

40.6

Tokai Carbon aims to increase the EBITDA of each business by returning our core Graphite Electrodes and Carbon Blackbusinesses to paths of growth, bringing about the stable growth of the Smelting and Lining business, and strengthening
production capacity in the Fine Carbon and Industrial Furnaces and Related Products businesses.

(billion yen)

69

258.9

EBITDA Growth Forecast by Business Segment(billion yen)

54.5

30

24.6
20

2021

2022

2025
(target)

2021

2022

2025
(target)* ROS (Return on Sales) = Operating income to net sales* Assumed exchange rate for “T-2025” targets: 1 USD = 130 JPY; 1 EUR = 140 JPY

19Tokai Carbon Co., Ltd.

2021

2022

2025
(target)

2021

2022

2025

31
27

Carbon Black
Fine Carbon

25

Graphite Electrodes

20

Smelting and Lining

8

Industrial Furnaces
and Related Products

10(target)

0

2022

2023

2025

(outlook)(target)Operating cash flow
2023–2025

210 billion yen
Three-year total

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Corporate Strategy

Corporate Strategy

3 Reinvestment for Growth

Empowering the Growth Engine through Reinvestment
The reinvestment of generated profits strengthens the engine (driving force) that generates new growth. Tokai
Carbon will accelerate its growth by effectively investing in the following areas: Facility expansion for the growthof each business segment, global environmental preservation, R&D that contributes to social development, M&A
and investments that create new co-creation, and human capital, which is the source of value creation.

Business Investment
Conceptual Diagram of the Growth Engine

Medium-term Management Plan “T-2025”
Purpose

Corporate
Administration• Sustainability promotion• Global governance• Strengthening of our
financial position

Human
Capital• Diversity• Engagement• Recruitment/
development of
human resources

Business• Expansion of production capacity• Environmental system investment• Creation of synergies between
businesses

GrowthEngineM&A/
Investment• M&A/Investment• Joint research• New business exploration

Technology• Development of new
products applications• Reduction ofenvironmental
impact• Evolution of coretechnologies

Investment Amount

Description(three-year total)

Expansion of
production capacity

36 billion yen

Increase production capacity for fine carbon and industrial furnaces,
two business areas that are witnessing promising growth

Environmental
system investment

17 billion yen

Environmental measures to be carried out at North American plants
where carbon black is produced

Facility renovation

70 billion yen

Renovation of facilities to realize stable supply and improve throughput

Technology Investment
Our five research centers (the Fuji Research Laboratory, which serves as our general research laboratory andmain research facility, the Chita Laboratory, Hofu Laboratory, Tanoura Laboratory, and Chigasaki Laboratory)
conduct everything from basic research on carbon materials to the development of new products.
In the development of new products, we have developed solid SiC Focus Rings using our proprietary CVD*
method. Solid SiC Focus Rings are used in equipment for manufacturing high-performance semiconductors.
To reduce environmental impact, we plan to develop anode materials for lithium-ion batteries used in EVs andother vehicles in Japan using heat treatment technology developed in our Graphite Electrodes business. Now
planning to expand the anode production technology to Europe and the U.S. Based on our surface treatment
technology, one of our core technologies, we have also developed Aqua Black, a modified version of carbon
black that is mixable with water. This material is used in black ink for inkjet printers and other applications. Tokai
Carbon will continue to focus on the development of advanced technologies that meet the needs of the times.

Research andDevelopment Expenses(Million yen)

3,171

3,200
2,682

2,823

1,600

0

2020

2021

2022

* 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

Human Capital Investment
Providing opportunities to learn and take on challenges
In order to develop human resources to take on global challenges and make a leap forward, we conduct study-abroad language training
and global training, as well as next-generation leader training and executive management training to develop human resources who will be
responsible for future management.

Promoting diversity
Tokai Carbon actively hires experts who can respond quickly and flexibly to issues that require expertise. In addition, we have set targets forraising the percentage of females to the total number of new graduates taken on for career-track positions, increasing the number of womenin managerial positions, and increasing the number of foreign employees in managerial positions. These are initiatives that the Company
promotes.

Strengthening our strategic foundation by improving engagement
Tokai Carbon is promoting initiatives that lead to increased engagement, such as reviewing the personnel compensation system and shortening
working hours. From 2023, we plan to visualize and analyze engagement levels and implement initiatives to improve and enhance them.
See pages 47 - 48 for the targets and progress of each initiative.

21

Tokai Carbon Co., Ltd.

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Corporate Strategy

Corporate Strategy

4 Business Area Expansion

Market Creation
Our enhanced growth engine will invigorate our market creation efforts. As a manufacturing
company that possesses materials production technology, Tokai Carbon's products are used ina wide range of industrial fields. We will continue to create new value by utilizing our expertise incarbon materials to contribute toward achieving carbon neutrality and solving relevant issues.

Market Creation Opportunities

Advanced Materials Investment

Advanced Materials• For SiC semiconductor manufacturing
equipment• R&D products

Solutions• RUC (Ready-to-use Cathode)• Eco-friendly industrial furnaces• EREMA recycling products• Used tire recycling®

Due to the miniaturization of semiconductors and increases
in cell height, the load on components used in semiconductor
manufacturing equipment is increasing. Tokai Carbon was thefirst company in the industry to succeed in the mass productionof solid SiC Focus Rings. Their adoption is expanding as a newmaterial that offers twice the service life of conventional siliconcomponents. In addition to high-purity SiC products, we havedeveloped and supply TaC (tantalum carbide), which has evenbetter heat resistance than SiC, to respond to the higher-loaded
manufacturing process for SiC semiconductors, which are
expected to become the next-generation semiconductors.

Solid SiC Focus Ring

TaC susceptor

Solutions for Future Needs

Expansion of
Existing Markets
EAF…………………… 4-5% annual growthTires……………… 4-5% annual growth
Aluminum………… 4% annual growth
MLCC*…………… 10% annual growth* Multi-Layer Ceramic Capacitors* EAF: Electric arc furnace

Needs Surrounding Local
Production for Local Consumption• Expansion of the anode materials business in
Europe and the U.S.
• Respond to the needs of local semiconductor
procurement

New Businesses• New business areas not restricted
to carbon-based materials• Innovative technologies for achieving acarbon-neutral society (including CO2 reduction,
immobilization, and utilization technologies)

With the demand for carbon neutrality and resource recycling initiatives, thechallenges facing our customers are also changing dramatically. We will contributeto solving issues through co-creation with customers so that we can move ahead ofdemand in response to the new needs that arise in these circumstances.
RuC® solution-type next-generation cathode

Initiatives for Creating New Businesses
Exploring new business opportunities through the promotion of carbon neutrality
Tokai Carbon has set a goal of achieving carbon neutrality by 2050. Through our efforts to achieve this, we aim to solve
issues through various technological innovations. In addition to creating businesses that do not depend on fossil fuels, we aremaking efforts to review the use of raw materials in our existing businesses, switch to clean energy, and invest in CO2 collection
technology. In addition, through co-creation with other companies, we will promote research on tire recycling technologies andtechnologies for manufacturing carbon materials using CO2 as a resource with the aim of creating new business opportunities.

Establishment of the Business Incubation Department
In September 2022, Tokai Carbon established the Business Incubation Department. In addition to creating new businesses, we
aim to build a system for launching new businesses on an ongoing basis. In order to create new businesses in the non-carbon
fields that do not rely on fossil fuels and to convert CO2 into a resource (manufacturing of carbon materials and products from
CO2), we will develop cross-departmental activities, actively co-create with external organizations, and promote initiatives.
Activities of the New Business Promotion Department• Explores new business areas that are not restricted to carbon• Makes use of external institutions (collaborates with universities, research institutes, venture firms, etc.)• Co-creates carbon-neutral technologies• Tallies and deeply investigates Group technologies and finds way to utilize them

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Corporate Strategy

Corporate Strategy

5 Business Portfolio

Stable Cash Flow
With a diverse and well-balanced business structure, we will reduce the impact of market fluctuations
and generate stable cash flow. This will serve as the foundation for realizing a “stable supply of highquality products” and the loops in the direction of our long-term vision will continue to rotate towardfurther growth.

Industrial Furnaces
and Related Products2022 Business Composition

Other

4.8%

Although our largest business was the Graphite Electrodes
business, the acquisition of a U.S. base for our Carbon Blackbusiness, growth in the Fine Carbon business, acquisition of the
Smelting and Lining business, etc. made our business composition
less dependent on Graphite Electrodes by the end of 2022, which
contributes to cash flow stabilization.

Graphite Electrodes

17.5%

Smeltingand Lining

19.2%

3.3%

2022
Sales Composition
by Business
Segment

Fine Carbon

14.5%

Carbon Black

40.7%

ROIC Measures by Business Segment
Our consolidated WACC (weighted average cost of capital) was 5% and consolidated ROIC (return on invested capital)
was 7% at the end of FY2022. At the same time, the ROIC of each segment exceeded WACC. We target ROIC higher than
10% for 2025 by promoting business “selection & concentration” and implementing measures tailored to the businessenvironment of each segment.
We will expand our business areas, especially in the Fine Carbon and Industrial Furnace and Related Products businesssegments, which are growing businesses and each have a high ROIC, by increasing production capacity and developing
next-generation products. In Graphite Electrodes, our core foundation business, Carbon Black, and Smelting and Lining
businesses, we will secure stable cash flows and stabilize profits across the Group by implementing measures tailored toeach market environment.

“Selection & Concentration” Aimed at Optimizing Our Business Portfolio
In November 2021, the Board of Directors approved the Business Portfolio Management Policy. In addition tosetting and monitoring profitability and capital efficiency targets based on the cost of capital, the Board of Directors
deliberates on the direction of our business portfolio on an annual basis, taking into account consistency with our
long-term vision and perspectives toward medium- to long-term growth. We will pursue a business portfolio that
continuously improves corporate value by analyzing businesses, products, product types, bases, etc. from various
perspectives and promoting selection and concentration.
In addition, amid the trend toward decarbonization, we aim to realize our long-term vision of “Contribute to asustainable society through advanced materials and solutions” by transforming our portfolio to incorporate new
businesses that do not rely on fossil fuels while maintaining our core carbon-related businesses, such as our Graphite
Electrodes and Carbon Black businesses in the medium term.

Perspectives
Consistency with our
long-term vision
Management environment
ROIC/WACC

25

Tokai Carbon Co., Ltd.

High
Increased ROIC・Reducing costs byreviewing raw
materials and processes

GraphiteElectrodes

Fine
Carbon

ROIC

ROIC

8%

・Setting of appropriate
selling prices

Incorporation into the capital
investment plan

・Business area expansion
・Production capacity
increases (throughaggressive investment)

Industrial
Furnaces
ROIC

30%

Low

Restructuring in terms of business,
products, product type,and location

New business development
and M&As

High Growth/High ROIC

16%

Incorporation into
the management strategy

Synergy
Potential

MarketGrowthBusiness
Portfolio
Optimization

CarbonBlack

Smeltingand Lining

ROIC

ROIC

7

ROIC
(2022)

High

17%

%

Stable Sales (cash cows)

Stabilization of High ROIC

・Project promotion for establishing a newbase in Thailand (TCP)・Differentiation by offering high qualityand development proposal-based products

・Enhancement of our production systemthrough the early completion ofenvironmental investment in the U.S.

・Product output for overall optimization

Low

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