Message from the Executive Officer in Charge of Finance and Accounting

Recognizing It Is Time to Adjust Our Balance for the Future

Since assuming the role of director in charge of the Finance & Accounting Division in April 2025, I have viewed my mission as understanding the fundamental priorities of our business management from an objective standpoint, making balance adjustments as necessary, and keeping in mind that to sustainably create corporate value entails the simultaneous achievement of seemingly contradictory imperatives, such as achieving short- and long-term goals while furnishing growth investments and shareholder returns. In my view, we have arrived at a critical juncture that calls for a balance adjustment.

Throughout the period spanning from our previous medium-term management plan (MTMP 2023) to the current medium-term management plan (MTMP 2026), we have focused primarily on increasing our business scale. We have actively focused investments on the growth of our Uniqueness & Presence (U&P) businesses, such as the three ICT businesses, which are our growth drivers. As a result, for some time investing cash flows were larger than operating cash flows. These active growth investments were initiated at the request of our customers and executed premised on the assumption that we would be able to recover our capital with a high degree of certainty. In fiscal 2025, however, in response to market environmental changes that exceeded our expectations, we decided to discontinue the construction of our meta-xylenediamine (MXDA) manufacturing facility in the Netherlands, resulting in the recognition of an impairment loss in relation to all of the project's assets. Consequently, the Group recorded a loss attributable to owners of parent for the first time in 13 years.

Reaching our targets for fiscal 2026, the final year of MTMP 2026, may be challenging. This is primarily because investments to meet growing demand were concentrated in one particular period and because, although investing cash flows are less than initially projected, operating cash flows are even further below initial projections. In fiscal 2025, operating cash flows finally surpassed investing cash flows. Beginning from fiscal 2026, the Group will focus even more on realizing returns on investments, aiming to transform into an entity with a muscular business structure. Having thoroughly ascertained why we did not recover our investment in the Netherlands and recorded an impairment loss, we are now setting our sights on the next medium-term management plan (MTMP) and revising measures to ensure that such incidents never recur. On the other hand, while tightening investment discipline is vital, simply establishing high hurdle rates risks dampening our investment appetite. Our fundamental stance thus remains unchanged: ongoing investment is indispensable for sustained corporate value creation. Learning the lessons of the Netherlands project, our corporate divisions are leading efforts to build systems that facilitate close monitoring of situations and prompt decisions on whether course corrections are needed.

Simultaneously Realizing a Muscular Financial Structure and Improved Capital Efficiency

Despite recording a loss attributable to owners of parent in fiscal 2025, we have maintained a certain level of financial soundness, keeping our equity ratio, interest-bearing debt, and D/E ratio within planned levels. In fiscal 2026, we will continue to promote asset-light strategy by disposing of strategic shareholdings and non-business assets while managing cash and deposits at optimal levels. Further, group financing and other mechanisms are functioning effectively, enabling us to consistently keep our cash and deposit balance at a low level. Through cash management that utilizes such strengths, we will maximize capital efficiency. MTMP 2026 sets an upper limit of 0.55 time and a lower limit of 0.30 time for the D/E ratio. We will also continue balance sheet management aimed at simultaneously enhancing capital efficiency and ensuring financial soundness. Further, as we maintain an A+ long-term credit rating from Rating and Investment Information, Inc. (R&I) and possess sufficient borrowing capacity, our policy when executing investments is to utilize financial leverage while lowering our cost of capital. Given the current environment of upwardly trending interest rates, we consider the diversification of our funding sources to be crucial. We will remain committed to reducing financing costs while carefully managing the balance between short-term and long-term debt.

I believe that the foundation enabling this diverse range of financing options is the result of credibility built up over many years by our predecessors. In fiscal 2026, we will continue a progressive dividend policy and do not intend to reduce the dividend, provided that doing so does not compromise financial soundness. Having set a dividend on equity (DOE) ratio of 3.0% and a total payout ratio of 50.0% as targets, we will endeavor to enhance corporate value by also considering the flexible acquisition of treasury stock in light of conditions. In fiscal 2026, by steadily executing the strategies outlined above, we aim to simultaneously realize a more muscular financial structure and improved capital efficiency, thereby paving the way for our next MTMP.

Utilize Financial Leverage for Optimal Capital Structure

• Control the balance sheet through the D/E ratio to strengthen ROIC management. With a view to balancing capital efficiency and financial soundness, a range of around 0.30 to 0.55 time is assumed during the period of MTMP 2026.
• While maintaining financial soundness, the Group improved capital efficiency by utilizing debt to finance growth investments. As a result, the D/E ratio rose to 0.35 time at the end of fiscal 2025.
• Continue to maintain financial discipline and proactive use of debt financing

Delivering Results to Maintain and Strengthen Credibility While Emphasizing Future Growth Potential

Our business model is centered on addressing customer issues by providing entirely unique, high-value-added products and thereby share value with customers and, by extension, society at large. As times change, so do the challenges we face. We therefore address these challenges by tirelessly diversifying and extending the applications of our products, even though the products themselves may remain unchanged. We take pride in the fact that these initiatives contribute to further innovation across a wide range of fields and play a role in supporting various industries. On the other hand, under this business model, it is ultimately customers—not us—who decide in which markets and for what kind of applications our products are used. Consequently, the diversification of our business portfolio is unavoidable. To further understanding of how the Group’s approach and business model sustain the enhancement of corporate value, each business must not only perform steadily but also focus efforts on emphasizing its future growth potential. To maintain and strengthen the credibility that underpins our financial strategy, we will advance structural reforms with even greater urgency, drawing on the lessons learned in fiscal 2025.

Continue the Enactment of Proactive Shareholder Returns

• Under MTMP 2026, our shareholder return policy comprises a progressive dividend policy,^*1 a target total payout ratio of 50%,^*2 and a target divi-dend on equity (DOE) ratio^*3 of 3.0%.
• Despite recording a loss attributable to owners of parent in fiscal 2025, the Group remains financially sound. The annual dividend for fiscal 2025 was ¥100, up ¥5 year on year.
• In fiscal 2026, the final year of MTMP 2026, based on the above policy, we intend to increase the annual dividend by ¥10. Going forward, we will continue our proactive approach to the provision of shareholder returns.

• *1 Covers the three-year period of MTMP 2026. In principle, no reduction—either increase or maintain
• *2 Increase medium-term target from 40% to 50%
• *3 2.83% in fiscal 2024, 2.96% in fiscal 2025, above 3.00% in 2026 (forecast)
• *4 Incl. ¥10 commemorative dividend

I would like to ask our shareholders and investors for their continued support and understanding.

Motoyasu Kitagawa
Director, Senior Managing Executive Officer
In charge of Internal Control & Risk Management, responsible for Administrative & Personnel,
in charge of Finance & Accounting Division and CSR & IR Division
September 2026