Toyo Tanso : Integrated Report 2023 issued

Integrated Report

2 0 2 3

2030 Management Vision

"Creating products with unprecedented potential"

Becoming a leading company through Earth-friendly products and technologies

Company Policies

Become a global company

For the world, for society

Become a strong company

Medium-Term

Management Plan

P.16

02

On the publication of the Integrated Report 2023

Embracing the challenge of even greater accomplishments in accordance with our 2030 Management Vision

The Toyo Tanso Group began publishing an integrated report in 2022 so that customers, shareholders, investors, and other stakeholders can better understand its contributions to resolving social issues and increasing its corporate value through its businesses. This marks the second publication of our integrated report.

The Toyo Tanso Group has established a robust foundation built atop its aspirations for"Manufacturing completely unique products."

This foundation was built based on our extensive pursuit of added value, and this stance will remain unchanged for many years to come.

Our management vision for 2030 of"Creating products with unprecedented potential"and"Becoming a leading company through Earth-friendly products and technologies"speaks to this commitment. This integrated report highlights a number of the Toyo Tanso Group's initiatives, detailing what we can do to give back to society while also pursuing our own growth.

Editorial policy

The Integrated Report 2023 provides a concise summary of the most important aspects of the Group's value-creating operations. More detailed information can be found on Toyo Tanso's sustainability website and on its IR website. In compiling the report, we have drawn on the recommendations of the International Integrated Reporting Council's International Integrated Reporting Framework and on"Guidance for Collaborative Value Creation,"a publication of the Ministry of Economy, Trade and Industry.

Scope of coverage

The report covers Toyo Tanso Co., Ltd. and its domestic and overseas consolidated subsidiaries.

* Some non-consolidated information pertaining to Toyo Tanso Co., Ltd. alone is provided in notes.

Dates of coverage

FY2022 (January 1 to December 31, 2022)

* The report also includes some information about activities undertaken during or after January 1, 2023.

Precautionary note concerning forward-looking statements

Forward-looking information contained in this report, for example forecasts of future performance, represent judgments made on the basis of information that was available at the time of their disclosure. Such information by its nature includes numerous sources of uncertainty, and actual performance may vary due to factors including changes in business conditions.

Information disclosure structures

• Documents disclosed in accordance with legal requirements Documents disclosed in a timely manner

				Brevity
			Integrated	Report
		Sustainability/ ESG information	Information for shareholders
Non-financial	and investors		Financial
content		• Corporate Governance		• Securities Report*		content
			Report*		• Financial Results*
		• Sustainability website
			• IR website
			www.toyotanso.com/
				www.toyotanso.com/IR/
			sustainability/

Comprehensiveness

Contents

Message from the CEO

04 Message from the CEO

Background of value creation

1. History of value creation

1. Business domains

1. At a Glance

Toyo Tanso's value creation story

14 Value creation process

16 Medium-Term Management Plan (2023 to 2027)

18 Business strategies based on the Group's business portfolio

20 Materialities and contributions to the resolution of social issues

1. Sustainability structures
2. Roundtable Discussion involving Group Heads of Sustainability Committee

Pursuing product development and manufacturing technologies to resolve social issues and customer needs

1. Pursuing added value and promoting globalization through improved competitiveness
2. Developing products and improving manufacturing processes to help realize a recycling-based society
3. Complying with increasingly sophisticated quality requirements
4. Developing new products and improving services in partnership with stakeholders
5. Policies and initiatives for intellectual properties
6. Column: Double winner of Monodzukuri Nippon Grand Awards

Contribution to reducing climate change risk and environmental protection

1. Reducing greenhouse gas emissions, including through energy savings and creation
2. Contributing to the reduction of greenhouse gas emissions through products

1. Complying with various countries' environmental laws and regulations and reducing environmental impacts
   Using Earth-friendly raw materials and avoiding procurement risk
2. Environmental policies and management system
3. Compliance with TCFD recommendations

Creating safe, secure workplace environments where all employees can flourish

1. Improving safe, healthy workplace environments and increasing productivity
2. Ensuring the human rights of all stakeholders
3. Offering human resources development, training, and education programs
4. Respecting workforce diversity

Undertaking corporate activities that inspire trust

1. Compliance
2. Strengthening crisis management capabilities
3. Undertaking community service activities
4. Corporate governance

51 Roundtable discussion among outside directors

Financial and non-financial information

54 Financial and non-financial highlights

56 11-year financial and non-financial summary

58 Consolidated financial statements

Corporate information

63 Company profile/Stock information

Message from the CEO

Message from the CEO

Message from the CEO

Fostering a corporate culture with dynamic frontline operations aimed at high value added manufacturing and sustainable growth

Naotaka Kondo

Representative Director

Chairman & President, CEO

Looking Back on FY2022 When We Posted

Higher Profit on Increased Revenue

The business environment remains uncertain as a result of geopolitical risks, economic downturns, and surging resource prices. Against this backdrop, in FY2022, we recorded net sales of 43,774 million yen (up 16.0% year-on-year), operating profit of 6,667 million yen (up 17.7%), ordinary profit of 7,369 million yen (up 17.6%), and profit attributable to owners of parent of 5,181 million yen (up 16.0%). In particular, net sales and net income profit reached record highs. The driver of the increase in revenue was the semiconductor sector, especially products for SiC semiconductors, which are indispensable for electric vehicles (EVs) and communication networks such as 5G. We saw the potential of and focused on this segment before any other company did, and this has led to customer satisfaction, which, I believe, produced these results. Within this segment, components for epitaxial growth* are building more than 50% of high market share.

As we build a stronger global supply chain, our extensive improvements to our production capacity in Japan and overseas also led to this dramatic progress in revenue and profit. We reviewed various aspects of production such as automation, changing to multi-tasking machines, and consolidating processes. In addition, our utmost focus has been on human resource development. One of the bottlenecks in manufacturing is machine breakdown, and if one operation stops, work cannot move on to the next process. Therefore, we provided detailed technical guidance on how to maintain machines so that they do not break down, what to pay attention to, and how to keep records and manage them. Another focus has been increasing multi-skilled operators. This refers to a single employee having the ability to operate multiple different machines, and once this is possible, we can manufacture with a smaller number of

selected people. We are already working on this in Japan, but we are also promoting multi-skill development overseas by developing human resources who has multi tasks. We believe that developing human resources and enhancing productivity in this manner, as well as producing products of stable quality globally, is essential for maintaining and improving the Toyo Tanso brand.

*Refers to the process for growing single crystal thin film on wafers.

Three Company Policies under the 2030 Management Vision and Their Aims

Last year, the Toyo Tanso Group formulated its Management Vision of "Creating products with unprecedented potential" and "Becoming a leading company through Earth-friendly products and technologies," and set out its vision and general directions characterizing the challenges it will embrace for sustainable growth. In addition, we defined three company policies: "Become a global company," "For the world, for society," and "Become a strong company," each of which has a different aim.

First, one of the aims of "Become a global company" is to strengthen communication with overseas subsidiaries. In providing the aforementioned technical guidance, as well as improving product quality and understanding customer needs, the key is close communication. The Head Office is responsible for any problems that arise overseas, so we must always keep grasping the latest information. Therefore, we are working

to strengthen our governance system globally by using a management book for all subsidiaries (containing the Group's common management standards) and enhancing the checking function of the Head Office. We are also looking to strengthen our cohesion globally and increase sales in overseas markets.

04	TOYO TANSO Integrated Report 2023 05

Message from the CEO

Message from the CEO

"For the world, for society" involves, as it says, contributing to society. This refers to product manufacturing, but in order to further increase employee motivation, it also includes activities to inform employees about where and how the products they are involved with benefit society. In addition, we are working on measures to address the declining birthrate and aging population, which is a social issue. In order to increase productivity even with a small head count, we will first promote automation from physically demanding work and nighttime work. Furthermore, we are creating a workplace where everyone can work comfortably, making the workbench at a height that is easy for women to reach and changing the design of uniforms.

"Become a strong company" means becoming a company that can generate a solid profit. With these increased profits, we intend to increase the compensation paid to our employees. To this end, it is necessary to create high value-added products that can only be made by the Toyo Tanso Group. There is much work to be done, such as promoting selection and concentration, acquiring advanced technical skills, and lowering costs by increasing productivity.

To promote understanding of these policies and to share information, we have created an in-house monthly newsletter called C dash Kawara Edition, which distributed to all employees. Personally, I plan to visit our overseas subsidiaries and listen to the voices of those on the frontline of our operations.

Initiatives and Targets in Our Medium-Term

Management Plan (2023-2027)

Management targets are net sales of 66.5 billion yen, operating profit of 13.5 billion yen, operating profit ratio of 20.3%, and ROE of 10%. In addition to net sales, profits are important for increasing employee compensation and making the next round capital investments. Toward this end, we must establish a system

for value-added manufacturing that is only possible by the Toyo Tanso Group. We are constantly developing isotropic graphite (special graphite products), which is our main product, to make better products, and although we are taking a long-term perspective, we are also starting to promote recycling technology and take on the challenge of creating new material sources such as making carbon

1. from CO2. We aim to more quickly develop materials that can meet more stringent conditions such as durability, heat resistance, and cost for C/C composite products, graphite sheet products, mechanical carbon, and carbon brush.
   Capital investment is expected to total 51.5 billion yen, with
   30% of this planned to be used for the renewal and maintenance of existing facilities, and the remaining 70% for expansion and the introduction of new equipment and technologies. Since this plan is on a rolling basis every year, the amount of investment may change in the future, but we will establish a solid strategy for what kind of business we will develop in the large markets of the United States, China, and Europe, and make the necessary investments.
   An important role in the initiatives of this Medium-Term Management Plan is played by task force teams established by product and application. Leaders present and discuss information compiled by the team, such as how the size of the worldwide market, what is happening now, and how much demand will occur in the medium to long term, at the Group's global meetings. We consider various resources such as what is necessary to achieve the goal, how much investment is required if equipment is required, and what recruitment and education plans to implement if human resources are needed, in formulating our Medium-Term Management Plan.
   The important thing is to determine market timing. Our products should not arrive to market too early or too late. Therefore, in order to listen to the voices of our customers, not only our sales representatives but also I hold regular interviews with our customers to confirm the direction and timing of investment. In addition, we inform our suppliers of trends for the next year and the year after, and ask them to secure raw materials. In order to procure products as desired, our customers also focus on our manufacturing capacity, in addition to whether there are any problems with our raw material sourcing. Therefore, we have established a department called the Global Supply Chain Promotion Department, in which key persons from related functional departments participate across organization lines. The aim is to grasp the operating status of facilities in Japan and overseas, manage delivery time, quality, and cost throughout the Group, and maximize the use of limited capacity. For example, if there is not enough capacity in Japan, we will use the available capacity in the United States to meet customer requests and improve productivity.
   From a longer-term perspective, relying solely on existing products could inhibit our business growth. Therefore, we must make tireless efforts to create new products, including continue to develop with an eye on the future while aligning our efforts with our customers. Moreover, we must lower costs in order to increase profits. I believe that this is a very important initiative not only

from the perspective of profits, but also from the perspective of population decline. In order not to fall into the situation where we cannot make products due to labor shortages, improving production efficiency through automation is the most important task.

Performance Forecast for FY2023

and Strategies

For FY2023, we plan to achieve net sales of 48.5 billion yen (up 10.8% year-on-year), operating profit of 8.5 billion yen (up 27.5%), ordinary profit of 9.3 billion yen (up 26.2%), and profit attributable to owners of parent of 7.0 billion yen (up 35.1%). Rapidly growing SiC semiconductor applications will be the driving force, and demand for metallurgical applications is expected to be resilient. Although the silicon semiconductor market is entering an adjustment phase, the impact on our earnings performance is expected to be relatively minor. In terms of profits, electricity, raw material and fuel prices are still soaring, and fixed costs, mainly labor costs, are on the rise. On the other hand, raw material and fuel prices are expected to be absorbed to a certain extent by progress in our efforts to pass these on in price increases, and we are aiming for record high net sales and profits by increasing sales volume. In particular, we plan to increase capacity of SiC-coated graphite products by 1.5 times by FY2024, and operating some

of the equipment this fiscal year will also contribute to earnings performance from the third quarter onward. As a result, our operating profit ratio is expected to increase 2.3 percentage points year on year to 17.5%, and ROE is expected to be 8.8%.

Strengthening and Evolving Sustainability

Management

With the establishment of the Sustainability Committee in FY2021, it became clear that there are many things that need to be addressed for the sustainable development of society, the maintenance of the global environment, and the further growth of the Toyo Tanso Group. To ensure that these are realized, we are allocating issues to the ESG Value Creating and Promoting Group, the Sustainable Consumption and Production Group, and the People and Organizational Vitalization Group, which make up the committee, and to carry out initiatives.

Our materiality as it relates to sustainability is divided into four categories. In the area of "Contribution to reducing climate change risk and environmental protection," we have set targets of reducing greenhouse gas emissions per unit of production by 30% by 2030 and achieving a 35% ratio of environmentally friendly products to net sales, and we are working to achieve these targets. In addition, we have implemented measures to develop products and improve

manufacturing processes for a recycling-oriented society in the area of "Pursuing product development and manufacturing technologies to resolve social issues and customer needs" and to enable women and the elderly to play an active role in "Creating safe, secure workplace environments where all employees can flourish." With regard to "Undertaking corporate activities that inspire trust," we are striving to establish a stronger governance system throughout the Group.

In addition to these team-based initiatives, we believe that the thinking and execution of each and every employee is very important in initiatives and transformations to achieve our targets. This is because it is the frontline employees who know best, what is really needed and what can be done in their day-to-day work. We also expect that these challenges will lead to the fulfillment of our work.

Becoming a Stronger Group with Greater

Employee Satisfaction

As various events occur in Japan and overseas and society continues to become more complex, companies must always have a sustainable perspective and look ahead to survive. In doing so, we believe that we should present a vision and direction that is convincing to our stakeholders, especially our employees, and I actively send out messages, hold roundtable discussions, and conduct interviews. We are also promoting initiatives to increase employee satisfaction, such as improving openness by increasing opportunities for exchanges between departments and updating the workplace environment by listening to the voices of our people on the frontline of our operations. How can we make work more comfortable for employees? I believe the answer can be found in making sure employees that are occupied but also having fun.At any rate, a company is only able to operate because of its people. I believe that the Toyo Tanso Group will become even stronger by increasing the number of people who want to work here and who believe the company will be better if they take these actions. We will continue to make efforts so that our strength could be a key to resolve social issues.

President Kondo pictured at center of the front row with members of domestic and overseas affiliates at the Toyo Tanso Group Global Conference

06	TOYO TANSO Integrated Report 2023 07

Background of value creation

Background of value creation

History of value creation

At the time of its founding, the Toyo Tanso Group was a processor. We started material development with the founder's strong commitment to"offer first-class materials,"and have taken on the challenge of pursuing original and innovative carbon particularly in high-performance fields, creating a number of long-selling products. Even today, we continue to pursue"products with unprecedented potential"while keeping up our diligent work.

Trend in net 'salessproductlineup	■ Net sales (consolidated)	1955	1960	1965	1970	1975	1980	1985
1941	1945	1950
	■ Net sales (non-consolidated)

						*
1990	1995	2000	2005	2010	2013	2013	2015	2020	2022
					.5	.12

• The end of the fiscal year changed from May 31 to December 31 starting with the fiscal year ended December 2013. Consequently, the fiscal year ended December 2013 is an irregular fiscal year insofar as it consisted of only seven months of operations (for some subsidiaries, nine months).

(Millions of yen)

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

History of technologies created and Toyo Tanso

1941	1950	1960	1970	1980	1990	2000	2010	2020
Founded		Binder

Electrical carbon

We developed resin binder, a carbon

(carbon brush)

brush material that combines carbon

DC graphitization

and synthetic resin. This carbon brush

was highly evaluated not only in

furnace

Japan but also in Korea, Taiwan, and

the United States, and was adopted

Resin impregnation

Mechanical carb

on

one after another as an automobile

LS materials/

KC materials

Metal impregnation

In 1974, we established the industry's first mass production technology for isotropic graphite.

part against the backdrop of the

LA materials

spread of automobiles.

It has been successively adopted as a component of single crystal silicon manufacturing

High

Ultra high

equipment, and has become the cornerstone of our business expansion.

We improved the carbon brush material and developed a

purification

purification

full-scale carbon KC material for machines, and the material

Isotropic

Mass

Isotropic graphi

te

developed through further improvements was used for genuine

graphite production

parts such as piston rings and rod packing for compressors

manufactured by major heavy industry manufacturers.

We decided to enter the SiC-coated graphite products business in order to build bridgehead

Surface treatment materi

al

a mass production system after four years of trial and error. Our pursuit of added value

protection for semiconductor applications. We successfully commercialized and established

PERMA-KOTETM

PYROGRAPHTM

GLASTIXTM

EVEREDKOTETM

accelerated from here, and now we provide a variety of surface treatment materials with

(SiC-coated graphite products)

(pyrolytic carbon coated

KOTE

(TaC-coated products)

graphite products)

(glass carbon)

high added value according to the characteristics required by our customers.

In order peripheral domains to graphite materials, we entered the C/C

composite products business. We have reached practical application

products

New produc

ts

by bringing together elemental technologies accumulated in-house,

C/C composite

such as manufacturing methods and coating technologies.

08

Graphite sheets are made mainly from natural graphite instead of artificial graphite that we had offered previously. This attracted attention as an alternative to asbestos, and the Toyo Tanso Group sold imported products. Focusing on this high added value, we decided to take on the challenge of natural graphite. After numerous failures, we created a product that is a latecomer but of a quality that surpasses our competitors.

PERMAFOILTM

(graphite sheet products)

Based on the idea that"it will definitely be useful to the world,"we created CNovelTM from the spirit of taking on challenges passed down since our founding. CNovelTM is a powder material that is different from conventional products, and since the pore size inside it can be freely controlled from 2 nm to 50 nm, it is used for adsorption of various substances, energy storage, and chemical catalysis.

CNovelTM

TOYO TANSO Integrated Report 2023 09

Background of value creation

Business domains
Electronics
Since its founding, the Toyo Tanso Group has expanded its
operations into a wide range of businesses, including social
infrastructure, mobility, life sciences, electronics, and energy.
As we have journeyed together with customers, our
technologies have encountered numerous needs, giving rise
to new products and spurring the expansion of our operations
into new business domains.
Having been created in this manner, our product portfolio
is helping solve social issues from a variety of perspectives,
including saving energy, creating energy, and electrifying	Energy
automobiles. Going forward, we will continue to focus
on creating products with unprecedented potential and
technologies and embracing the challenges of new domains
while valuing our partnerships with customers.

Mobility

Social infrastructure

Life science

Background of value creation

	Semiconductors	Components for crystal growth
	Components for wafer processing
	Electronic components	Jigs for electronic component
Electronics	manufacturing

		Grounding brushes for power
		generators
	Power generation	Components for manufacturing solar
	power generation systems
		Core structure for next-generational
Energy		nuclear power reactors
Fuel cells	Catalyst carriers

	Railcars	Pantograph sliders
		Engine parts manufacturing
	Aerospace	(Electrodes for EDM, jigs for heat
		treatment)
Mobility
Automobiles	Parts for various types of pumps
		Gaskets

		Components for manufacturing
	Telecommunications	optical ber
	Components for manufacturing
		cables
Social infrastructure	General industry	Packings
Seal rings and bearings

	Healthcare	CT machine target materials
	Analysis column llers
		Components for manufacturing LED
Life science	Home appliances	Carbon brushes for vacuum cleaners
	Components for compressor

10	TOYO TANSO Integrated Report 2023 11

Background of value creation

At a Glance

The Toyo Tanso Group operates by manufacturing carbon materials primarily at plants in Japan and processing them at facilities in destination markets.

By consolidating the production of materials, we can pursue economies of scale and cost competitiveness while maintaining stable quality. In order to listen to the voices of customers and reflect their needs in our products, we process our products in locations close to our customers.

Worldwide

Net sales

43,774million yen

Employees	Locations	Manufacturing capital (property, plant and equipment)
1,690	19	31,138million yen

Background of value creation

Customers

Around 3,700

Top market share for graphite materials used to manufacture single-crystal silicon Top market share in graphite materials used to manufacture silicon/SiC epitaxial

• Head Office (material manufacturing, processing, and sales) ● Processing/sales facility
  ● Production site ● Sales facility

Germany

France

Italy

Europe

Employees Locations

134 3

Composition of

net sales

8.9%

Asia

Employees Locations

469 10

Composition of

net sales

%

40.7

Manufacturing capital (property, plant and equipment)

4,301million yen

South Korea

China

Head Office

Taiwan

Thailand

Singapore

Indonesia

North America

Employees Locations

116 2

Composition of

net sales

%

8.1

U.S.

	Manufacturing capital
	(property, plant and equipment)
Japan	932million yen
Mexico

Employees Locations

971 4

Composition of

net sales

%

41.7

Other

Manufacturing capital (property, plant and equipment) 1,420 million yen

Composition of net sales

0.6%

Manufacturing capital (property, plant and equipment)

24,483million yen(FY2022 results)

12	TOYO TANSO Integrated Report 2023 13

Toyo Tanso's value creation story

Value creation process

A variety of social issues, including increasingly serious environmental issues and a shrinking, aging population, are giving rise to a transformation in society and industry. The shift to a recycling-based society and digitalization are examples of innovations inspired by these issues, indicating that we stand on the verge of an era of significant change. The Toyo Tanso Group sees changes like these in the external environment as opportunities, and we are working to contribute to the realization of a sustainable society while increasing our corporate value through the deployment of an extensive portfolio of management resources and a robust program of business strategies.

Toyo Tanso's value creation story

Toyo Tanso Group

2030 Management

Vision

Global megatrends

Inputs (FY2022 results)

Manufacturing capital

Production sites

Japan: 7/ Overseas: 13

Intellectual capital

Strategies

Planning and execution of strategies by product and

"Creating products with unprecedented potential"

Becoming a leading company through Earth-friendly products and technologies

Extensive pursuit

of added value

R&D spending: ¥1.1billion

Number of patents acquired: 437

Human capital

Consolidated employees: 1,690

Of which, employees at 719 overseas sites:

Financial capital

Total assets: ¥77.2billion

Cash ows from	¥5.6billion
operating activities:

Number of sales and sales engineers

123

Ratio of direct sales

More than 90％

application by task force teams

Robust partnership

across the value chain, including customers and business partners

Solutions

• Provision of products and technologies that carefully address customer needs
• • Identifying the next issues and compiling seeds and needs

Governance

Promotion of stronger management groupwide using category leaders

(Processing technology, quality assurance, development, sales, procurement, legal, accounting, personnel, and information systems, etc.)

Development

• Product development that
  provides clues for resolving customers'issues
• Research and development with an eye toward future market trends

by function

Outputs (FY2027 plan)

Net sales

¥66.5billion

Operating prot

¥13.5billion

Operating prot ratio

20.3%

ROE

10%

ＣＡＧＲ

8.7%

Outcomes

Reducing greenhouse gas emissions

Helping realize a recycling-based society

Realizing industrial development

and a rich, satisfying society

Realizing diversity & inclusion

14	TOYO TANSO Integrated Report 2023 15

Toyo Tanso's value creation story

Medium-Term Management Plan (2023 to 2027)

The semiconductor market is entering a short-term adjustment phase, but strong growth is expected over the medium to long term. Based on the latest market forecasts and demand trends, the Toyo Tanso Group has formulated a Medium-Term Management Plan covering the period from 2023 to 2027 with semiconductor applications as a growth driver.

Under the 2030 Management Vision, the entire Group will work as one to achieve business growth.

Summary

POINT 1 Raised the previous target (announced in 2022) due to the upward swing in the growth forecast for the SiC semiconductor market

Semiconductor applications account for 50% of net sales (FY2022 result: 40%)

There are no major changes in other market/demand forecasts, and only minor adjustments were made to the plans for each product and application

< SiC semiconductor applications >

• For SiC wafers: special graphite product electronics applications
• For SiC epitaxials: compound material SiC-coated graphite products

POINT 2 Capital investment of 51.5 billion yen over five years centered on semiconductor applications

Strengthening the global production system in anticipation of strong demand exceeding existing capacity

Toyo Tanso's value creation story

Net sales targets by product and application

Strong demand for SiC semiconductor applications has led to significant growth in special graphite products, electronics applications, and compound material SiC-coated graphite products.

(100 millions of yen)

	FY2022 Net Sales	FY2027 Net Sales Targets	CAGR (2022 to 2027)
Special graphite products	202	322	9.8%
Carbon products for general industries	39	54	6.6%
(for mechanical applications)
Carbon products for general industries	48	72	8.6%
(for electrical applications)
Three major products of compound materials	99	192	14.2%
Other	47	24	Down 12.2%
(other products of compound materials and related goods)

Capital investments

We will increase capacity and strengthen production structures to reliably capture demand for semiconductor applications in each process of isotropic graphite material, machining, adding high value, and processing capacity of our subsidiaries.

Management targets

	FY2022	FY2023 (Forecast)	FY2027 (Target)	(Ref.) FY2026*1 (Previous Target)
Net sales	¥43.7 billion	¥48.5 billion	¥66.5 billion	¥54.5 billion
Operating	¥6.6 billion	¥8.5 billion	¥13.5 billion	¥11.0 billion

Total capital investment amount	Strategic		Steady
(FY2023 to FY2027)		investment		investment
▼		▼	:	▼
¥	bn
51.5		7		3

Examples of strategic investments

Direction of capital investments based on the strategies of the Medium-Term Management Plan

• Increasing global production capacity in high- value-added businesses
• Strengthening competitiveness in core businesses and stable businesses
• Deploying labor and energy savings, process innovations, etc.

prot
Operating	15.2 %	17.5 %	20.3 %	20.2 %
prot ratio
ROE	6.9 %	8.8 %	10 %	9 %

Foreign exchange rates: 124 yen to one US dollar, 136 yen to one euro, and 18 yen to one renminbi

EBITDA*2 in FY2027 of approx. 21.0 billion yen (EBITDA margin of approx. 30%)

*1 Medium-Term Management Plan announced in February 2022 (covering 2022 to 2026) *2 Operating prot plus depreciation

From 2024 onward, we plan to steadily complete investment projects, and we will strive to maximize supply by optimizing and streamlining our global production structures to meet demand that exceeds our capacity in the short term.

● Increasing production capacity for high	● Strengthening global	● Increasing production capacity
purification processing and SiC-coated	production structures	of isotropic graphite materials
graphite products	Strengthening value-added	We are considering increasing
Total amount of ¥7.0 billion	processes at each subsidiary	production capacity to ensure a
1.5x increase in capacity each	with a focus on semiconductor	supply volume that meets demand.
SiC-coated graphite products: completion in 2024	applications
High purification processing: completion in 2025

Market environment surrounding semiconductors

■ Silicon wafer market

CAGR of 5%from 2022 to 2027

Expected to increase consistently, almost unchanged from the previous plan

• Semiconductor manufacturers are planning large-scale capital investments, and the wafer market is expected to grow at a CAGR of 5% as a result.
• In particular, Epi wafers are expected to grow even higher amid increased demand for logic semiconductors.

■ SiC device market

CAGR of 40%from 2022 to 2027

The market size has expanded at an accelerated pace, reaching a CAGR of 20% in the previous plan, and in the latest plan this is expected to grow to a CAGR of 40%, representing a significant increase.

• In anticipation of the growing adoption of semiconductors in EVs and high-voltage devices, wafer and device manufacturers are planning to make aggressive and large-scale capital investments, and the SiC semiconductor device market is expected to grow at a CAGR of 40%.

Policy on shareholder returns			182.4%							90
Our policy is to deliver stable increases										70
	128.9%						60
in dividends while maintaining a balance
between returning profits to shareholders						50	50	50
and making growth-oriented capital
investments against a backdrop of					30
sustained growth in profits.			25	25
	22			35.6%	39.4%
							28.2%	28.3%
■ Dividend									27.0%
Dividend payout ratio	11.5					21.3%
34.4%
						20.6%
		FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020	FY2021	FY2022	FY2023
		Dec.	Dec.	Dec.	Dec.	Dec.	Dec.	Dec.	Dec.	Dec.	Dec.	Dec.

*Since net income for the scal year ended December 2013 was negative, the dividend payout ratio is not listed.

16	TOYO TANSO Integrated Report 2023 17

Toyo Tanso's value creation story

Toyo Tanso's value creation story

Business strategies based on the Group's business portfolio

General direction of business strategies

The Toyo Tanso Group classifies its products into three business types based on market growth potential and business volatility and implements appropriate and well-balanced business strategies.

Under the current Medium-Term Management Plan (2023 to 2027), semiconductor applications will be the driver, and special graphite products and compound material SiC-coated graphite products show increase in growth businesses.

High	Current revenue	Growth businesses
Future revenue
		SiC-coated
			graphite
			products
			C/C
Market		composite
		products
	Special
	graphite
growth		products	Graphite
		sheet
		products
Mechanical
potential
applications
	Electrical
	applications

Business strategies

■ Special graphite products	Main products			Trend in performance
Business development focused on the high-				■ Electronics applications / ■ General industry applications / ■ Other
value-added domain				(Millions of yen)				20,230
● Growing market share in the high-								17,143
value-added domain, for example in
												8,104
semiconductors, which are characterized by				13,907
	● EDM electrodes			6,751
demanding quality requirements					5,266
● Working to strengthen cost flexibility
and reduce the domestic manufacturing													9,598
burden in the general-purpose domain, for										8,377
example by outsourcing manufacturing							7,024
	● Single-crystal silicon manufacturing	● Continuous casting dies				1,616
						2,013			2,527
	2020	2021	2022
	equipment parts

Stable businesses		Differentiated businesses
Medium
Medium	Volatility	High

Growth businesses

Profit drivers

▼ Special graphite products (electronics applications and other, etc.) Three major composite products (SiC-coated graphite products, C/C composite products, and graphite sheet products)

Differentiated businesses

Conduct business development focused on the high-value-added domain ▼ Special graphite products (general industry applications)

Stable businesses

Contributing to the stability of the Group's businesses with few fluctuations in demand and profitability

▼ Carbon products for general industries (for mechanical and electrical applications)

Related goods

6.8%

• Carbon products for general industries

Contributing to the stability of the Group's businesses with few fluctuations in demand and profitability

• Mechanical application: Increasing cost competitiveness and strengthening sales in automotive applications and overseas markets
• Electrical application: Working to increase share in growth markets (Asia, household appliances, and power tools) by leveraging
  strengths (lead times and service) in order to increase the extent of the segment's contribution

Main products

• Carbon brush

● Bearings

● Pantograph sliders

Trend in performance

■ Mechanical applications / ■ Electrical applications
(Millions of yen)	9,465
	8,809
8,464
3,763	3,738	3,985
4,701	5,727	4,823
2020	2021	2022

Compound
materials and
other products	Ratio of	Special graphite
26.9%	Net Sales	products
46.2%
	(FY2022)

11.0%

Carbon products for	9.1%
general industries

(for electrical applications)

Carbon products for

general industries

(for mechanical applications)

• Compound materials and other products

A high-growth business that drives profit

• SiC-coatedgraphite products: Reliably capturing demand by boosting production capacity
• C/C composite products: Increasing sales through technical services like design
• Graphite sheets: Improving customer satisfaction through customization

Main products

● Crucibles

(C/C composite products)

• Graphite sheet products

• MOCVD susceptors
  (SiC-coated graphite products) ● Three-layered trays (C/C composite products)

Trend in performance

■ Three major products / ■ Other	11,765
(Millions of yen)
			9,306
7,835
								9,944
		6,743			7,808
		1,092						1,820
				1,497
2020	2021	2022

18	TOYO TANSO Integrated Report 2023 19