Now, at the beginning of the year, I would like to extend my sincere wishes that you all have a happy 2023.

1. Looking back at 2022

Last year we saw the arrival of very uncertain economic conditions. The prices of natural resources soared across the board, triggered by the war in Ukraine, and inflation advanced at an accelerated rate in countries around the world. The yen depreciated due to the revision of interest rate policies of the US and European central banks, and China's zero-corona policy was added to this. The economy intensified its trend toward deceleration, and there were growing concerns about "stagflation"—a recession under inflation. It was also a year in which other military risks threatening the peace and stability of East Asia—such as the Taiwan issue and moves by North Korea—became more apparent.
Under these conditions, we faced unprecedented cost increases due to soaring raw material, fuel and logistics costs. Profits declined, despite our best efforts to reduce costs by adopting low-grade coal and secure profits through repeated price revisions on the sales side.
Raw material and fuel prices are expected to remain high, amid rising "resource nationalism" and trends shifting away from fossil fuels. It is unavoidable that Japan will be inferior in terms of energy competitiveness in the future due to its absolute shortage of renewable energy. It will be very difficult to maintain international competitiveness with regard to basic materials. Due to high coal prices and the shift toward carbon neutrality, the superiority of in-house power generation—which has been a major source of competitiveness for us—has declined significantly. Now is the time for us to make a shift in our portfolio, from an energy-intensive model to a value creation model.

2. Progress in the 2025 Medium-Term Management Plan

Last year, we actively invested in the establishment of our second base of Tsukuba Research Laboratory, the functional expansion of our Taiwan Research Laboratory, capacity increase of Tokuyama Dental, and joint venture investments for high-purity IPA in Taiwan and South Korea. We also invested in the mass production of heat dissipation materials and production and development of electrolytic cells at our Center for Commercialization of Advanced Technology. Going forward we will continue to transform our portfolio, without slowing our efforts to cultivate growth businesses. In our traditional businesses, the price of fuels and raw materials and the shrinkage of the domestic market cannot be avoided. If the current situation continues, our ability to generate cash flow is expected to decline in the future. We will work to improve productivity by establishing highly efficient operations through business process innovation by utilizing DX.

3. Message to Our Employees

Currently, many of our organizations are experiencing institutional fatigue due to satisfaction with the status quo. In particular, I would like manager-level positions to be aware of the fact that being too comfortable with the current situation will inevitably lead to decline—and to take the role of heralding innovation by rejecting the status quo.
This year, we will work to reform our organizational culture by further advancing personnel system reforms. We will invest in human resources development to strengthen areas such as DX, overseas expansion and R&D, and consider the introduction of job-based systems.
In order for us to continue being a company that works "for the people of tomorrow," each and every one of us must continue working to improve and demonstrate our abilities. It is especially important to strive to develop our own abilities, setting ambitious goals on a daily basis so that we can become human resources who are always needed. While I am sure that the current difficult economic conditions will continue this year, I address you all in the New Year with the sincere hope that you will keep our Mission, Vision, and Values constantly in mind, and take a positive approach in implementing them. Thank you.