Business and Other Risks | Management Policy | Tokuyama Corporation

Business and Other Risks

Set out below are those matters relevant to the Tokuyama Group's business status and financial conditions that could potentially have a significant influence on investor decisions. Please note that the matters listed do not cover all risks relevant to the Tokuyama Group, and it is thought that there are risks other than those matters listed that could potentially influence investor decisions. The matters listed are those regarded as relevant as at June 25, 2018.


(1) Procurement/Market Conditions of Raw Materials and Fuels, etc.
The Tokuyama Group procures the raw materials and fuels essential to the carrying out of its production operations from all over the world. Moreover, for some of its products, the Group uses special raw materials and materials that have limited numbers of suppliers.
With regard to the procurement of raw materials and fuels, the Company engages in long-term, stable, low-cost procurement by combining, for example, medium- to long-term contracts and purchases on spot markets. However, in the event that a soaring market or resource nationalism give rise to the tight supply of raw materials and fuels or to delivery delays, or were the Group's production operations to be seriously compromised or manufacturing costs to rise drastically, there is the possibility that any such situation may greatly affect the Group’s business performance and financial condition.


(2) Dependence on Electronic Materials Business
The operating income from the Tokuyama Group's Electronic Materials Business has an important bearing on the operating income of the Group as a whole. In the event that pronounced peaks and troughs in the information and electronics industry markets lead in turn to a deterioration in the Electronics Materials Business earnings, there is the possibility that any such situation may greatly affect the Group's business performance and financial condition.


(3) Environmental Regulations, etc.
The Tokuyama Group operates a range of businesses that use natural resources and energy in large quantities. For that reason, the Group enhances both capital expenditures designed to reduce its environmental impact and its resource recycling systems, and accepts waste as alternative fuel and raw materials. At the same time, the Group also works to reduce its environmental impact by, for example, promoting Zero Emission initiatives and improving its unit energy consumption centered on energy conservation. However, in the event of a situation arising that requires the making of more stringent environment-related regulations or demands a new social responsibility for environmental protection, there is the possibility that any such situation may greatly affect the Group’s business performance and financial condition.


(4) Contractual Disputes/Litigation
Centered on its Legal & Credit Management Department and Intellectual Property Department, the Tokuyama Group takes day-to-day precautions against patent or contract disputes and litigation. However, with regard to both its domestic and overseas businesses, there exists the possibility of the Company becoming the subject of a legal dispute or litigation. Moreover, in the event of a major lawsuit being filed, there is the possibility that such a situation may greatly affect the Group's business performance and financial condition.


(5) Effect of Disasters/Accidents
To minimize the adverse effects from any disruption to its production operations, the Tokuyama Group performs day-to-day and periodic facility maintenance. Such maintenance, however, is unable to completely prevent or reduce the adverse effects on production facilities from disasters or accidents (including earthquakes and other natural disasters). Moreover, the Group also has products for which alternative production arrangements could not be immediately made. Should events lead to a significant decrease in production volume or, in the worst case, the Company be forced to discontinue production for a protracted period, there is the possibility that any such situation may greatly affect the Group's business performance and financial condition.


(6) Product Liability
The Tokuyama Group makes all-out efforts in quality control so that it is able to ensure proper quality in accordance with product characteristics. However, in the event that, due to unexpected circumstances, a quality problem leads to a free product recall or a product safety-related product liability (PL) issue arises, there is the possibility that any such situation may greatly affect the Group’s business performance and financial condition.


(7) Market Economic Trends/Conditions
The supply of and demand for Tokuyama Group products are subject to the trends of their respective markets, which are primarily the chemicals industry, the construction and construction materials industries as well as the information and electronics industries. Sold mainly in Japan, the United States, Asia, and Europe, the economic conditions in each country exert a great influence on sales of the Group's products. The Group targets production improvements and higher quality and also promotes cost reductions, but a fall in demand in these markets and industries or an economic slowdown in a sales area may greatly affect the Group's business performance and financial condition.


(8) Price Competitiveness
In each of the businesses that the Tokuyama Group is developing, competitors that supply similar products to those of the Group are present throughout the world. Maintaining a competitive advantage in terms of quality and price, the Group supplies products to its customers. In the event of low-cost imports flooding a market or a price war breaking out between rival companies due to unforeseen circumstances, and were that situation to continue for a prolonged period of time and cause a lowering of the Group's profitability, there is the possibility that any such situation may greatly affect the Group's business performance and financial condition.


(9) Overseas Business Development
The new polycrystalline silicon factory that the Tokuyama Group has built in the Malaysian state of Sarawak is comparatively larger in scale than the Group's existing overseas bases. In the event of a discrepancy arising in the plant’s stable operation or sales strategy, of unexpected changes being made to systems, laws and regulations, or of labor-management problems arising, there is the possibility that any such situation may greatly affect the Group’s business performance and financial condition.


(10) Financing Arrangements
The Tokuyama Group arranges financing through loans or the issue of unsecured bonds, but the cost of financing arrangements could increase due to changes in the market environment, such as in interest rates. There is thus the possibility that such a situation may greatly affect the Group's business performance and financial condition. Moreover, in arranging financing through a new loan from a financial institution or the issue of unsecured bonds, there is no guarantee of the Company being able to perform under the same conditions. In the event of the Group being unable to raise funds in a timely manner by means of loans from financial institutions or by issuing unsecured bonds, there is the possibility that any such situation may greatly affect the Group's financing arrangements.


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