Top Message

The TODA Group has been providing a wide range of inorganic materials that meet the needs of the times since its founding in 1823. A red pigment known as Bengala, the origin of our business, was an essential coloring pigment for construction materials and ceramics at the time of our founding. And today, we support society by supplying magnetic materials,　dielectric materials, soft magnetic materials and other materials in the growing fields of mobility, AI and the environment. The key to the TODA Group having continued to operate for more than two centuries lies in its establishment of proprietary technologies for manufacturing iron oxide, the raw material used to produce Bengala. Looking ahead, we will continue to refine wet synthesis and other fine particle synthesis technologies in greater depth, contributing to society by providing the materialsto meet the needs of the times.

To achieve its Ideal Vision for fiscal 2030, the TODA Group is in the processof implementing Vision2026, a three-year medium-term management plan beginning fiscal 2024. We are repositioning each business for profitability and growth potential, and engaging in a process of selection and concentration for business growth under our most important stated mission: strengtheningbusiness portfolio management.

We have also set management targets under Vision2026. In relation to our targeted operating profit margin of 2%, ROE of 6% and equity ratio of 26%, in fiscal 2024 we recorded an operating profit margin of negative 2%, ROE of negative 29% and equity ratio of 22%.

Despite having pledged to achieve these targets with a strong resolve when Vision2026 was formulated, we encountered challenging results in the first year of the plan, for which I feel a deep sense of responsibility. Internally, there were even suggestions to revise our targets given the gap between our targets and actual results. However, profitability has steadily recovered as a result of business portfolio management, and we have made the decision to leave the targets as-is and devote even more efforts to achieving them.

Looking at our financial results for fiscal 2024, consolidated net sales totaled 31.7 billion yen, our operating loss was 600 million yen, our ordinary loss was 1.4 billion yen, and we posted a loss attributable to owners of parent of 3.6 billion yen. Despite a year-on-year increase in net sales, both operating profit and ordinary profit recorded significant declines year over year.

Investments of management resources in Growth and the Next Generation were key factors behind the increase in net sales. As one example, the Koreabased TODA materials Inc. (hereafter, “TDMI”), which had previously been an associate accounted for using the equity method, was made a consolidated subsidiary, thereby strengthening business coordination. As a result, sales of soft magnetic materials saw significant growth, contributing to consolidated net sales.

However, there were two main factors behind the decline in operating profit.

The first factor was that profit recovery at TODA at the non-consolidated level (not including consolidated subsidiaries) was insufficient. A decline in demand for functional pigments and soaring raw material and energy prices factored into the decline in profitability.

Secondly, sales of precursor materials for lithium ion batteries (hereafter, “LIB”) contracted more than expected. LIB precursor materials are manufactured by the TODA Group’s Canadian subsidiary Toda Advanced Materials Inc. (hereafter, “TAM”), and have mainly been provided as EV materials for Europe. TAM’s stable net sales have long supported the TODA Group, but in recent years, orders have dropped off steeply due to automobile model changes, reducing profitability.

Under Vision2026, we positioned both businesses as being in the Revitalization/Reorganization business and have been directing activities aimed at improvements.

On a non-consolidated basis, we have worked on areas including product pricing optimization action and expense reductions, set the target of shortening the cash conversion cycle in particular, and strived to optimize inventory reductions. As a result, operating profit on a non-consolidated basis improved 900 million yen year on year, while consolidated inventory was reduced by 3.9 billion yen over the same period. Cash flows from operating activities have also steadily recovered, and we are working to transition to a more robust management structure, using the capital gained from the streamlining of working capital.

In the TAM business, amid declining demand, we spent considerable time reviewing and discussing a range of options, including expanding sales to new customers, the prospects of collaboration with partners, and future synergies through continued business operations. Ultimately, at its meeting in March 2025, the Board of Directors resolved to dissolve and liquidate TAM. While I believe the resolution was the right decision from the perspective of halting further losses, in the financial results for fiscal 2024, we recorded an extraordinary loss of approximately 1.1 billion yen as expenses expected to be incurred in relation to the dissolution and related procedures. We reflect with regret not having made this decision earlier, before losses had accumulated to this point. We also feel a deep sense of responsibility for not having been able to appropriately acknowledge the dedication of the employees who devoted themselves in the belief that operations could continue despite the business contracting. So that these reflections do not go to waste, we will review our analysis tools and ecision-making criteria, and make every effort to balance quality and speed in our analyses of management conditions and decision-making processes.

In implementing its most important mission of Vision2026, strengthening business portfolio management, the TODA Group is advancing efforts to develop products for mobility, AI and the environment, which it considers growth fields.

Demand for magnetic materials is expected to expand for use in motors and sensors in the EV market, and we provide these materials in various forms, from powders to compounds and molded products, to meet customer needs. In the area of molded products, the mold design and injection molding technologies possessed by our Chinese subsidiary have contributed to earnings, and we are looking to further expand them across the Group.

Dielectric materials are used in multi-layer ceramic capacitors (hereafter,“MLCCs”), which are essential for the mobility and AI sectors. We will expand our business fields from powders to dispersions* in response to market needs.

These magnetic materials and dielectric materials face market expansion along with intensifying competition. We will closely watch the gap between the growth rates of the market and TODA, and continue to invest the management resources necessary to secure competitiveness and build barriers to entry.

*dispersions: An even dispersion of powder in a solvent. This enables a balance between shortened processes and improved quality.

Soft magnetic materials are mainly used in inductors. By stepping up coordination with TDMI, which contributed to increased sales in fiscal 2024, we will reliably capture demand from the steadily growing inductor market in an effort to expand the business.

In the area of environmental related materials, we have started to see results from development and demonstration testing through collaboration between industry, academia and government. We have conducted demonstration testing of systems to recover carbon dioxide and systems that produce hydrogen from methane gas, and have made progress in obtaining the data needed for commercialization. Over the duration of Vision2026, these environmental related materials are not expected to contribute significantly to earnings, but I believe they will do so further into the future.

We are currently devoting all our strengths to optimizing the businesses categorized for Revitalization/Reorganization in our business portfolio. In addition to the dissolution and liquidation of TAM, as noted earlier, we have also dissolved our collaboration with Sakai Chemical Industry Co., Ltd. in the field of hydrotalcite, and are now seeking the adoption of our products in other markets including healthcare and semiconductors. In the area of toner and coloring pigments, we have been working to consolidate our product range and implement product pricing optimization action to reflect the market trend of declining demand. This has yielded tangible results.

In fiscal 2025, scale of sales generated by the TODA Group will temporarily decline due to the restructuring of these businesses targeted for Revitalization/ Reorganization. We will restructure our systems and facilities to reflect this scale of sales and aim to achieve the management targets set out in Vision2026.

Since fiscal 2024, the Human Capital Development Committee, which comprises internal directors and members of the Personnel & General Affairs Department, has been meeting regularly to coordinate on management strategy and human capital strategy. Given the fast-changing business environment, in the future we will need personnel who can correctly recognize the current situation, question it, and won’t hesitate to change it. At the same time, the TODA Group aspires to be an organization that embraces challenges. These aspirations are at the foundation of organizational development for the TODA Group as a company built upon technology. This message will be repeatedly communicated to employees and we will have those in leadership positions always keep them in mind.

We are also developing an environment to cultivate human capital equipped to drive the implementation of DX. We have newly established the Digital Innovation Department as the department responsible for DX implementation. By establishing a dedicated DX implementation department, we hope to create a framework to acquire digital skills at both the individual and organizational levels, to pass on that accumulated know-how as explicit knowledge, and to utilize it in every aspect of our operations. DX is essential to realizing our Ideal Vision, and I expect that the members of the Digital Innovation Department will be a major driving force at the core of TODA’s transformation.

The newly established Digital Innovation Department has a clear mandate.

In the short-term, that is to introduce new core information systems and develop more sophisticated operations. In terms of developing more sophisticated management operations, we will integrate each of the systems, such as production control, HR management and accounting, which were previously used separately for each business process. Migrating to the new system will not only streamline operations and reduce labor needs, but also facilitate value chain analysis using data that is integrated from inventory control through to sales. In terms of developing more sophisticated manufacturing operations, we will introduce automated processing and AI support for the manufacturing expertise supported by experienced workers, with the aim of reducing employee workloads, eliminating individual dependency, and facilitating the transfer of knowledge and skills.

In the medium-term, we will combine digital tools with TODA’s own technologies, leading to the formulation of technology strategies and business creation.

At the TODA Group, we describe our strength as our co-creation capability, which is the ability to integrate creativity, manufacturing capabilities and sales capabilities. This is the ability to turn continuously refined technologies into value, the ability to link theories of natural science with the real world, and the ability to launch new products with customers and business partners.

In developing products, the TODA Group engages in extensive dialogue with customers, verifying how customers will use the TODA Group’s products, and what challenges customers face. The TODA Group also wants to understand how our products are experienced, not only by our direct customers, but also their end customers. In addition, after we have released a product, we want to continue dialogue with customers, making ongoing improvements.

Continually operating to the same high standards as our customers, and continuing to meet those standards, are what drives the competitiveness of our products. We are sought after for new value creation and new development, by customers who recognize our advanced technological capabilities, regardless of whether they operate in growth or mature markets. I believe this is precisely the result of our co-creation capability.

Going forward, the TODA Group will extend this co-creation capability to accomplish the following three objectives.

1. Building a recycling-oriented society

While the worldwide population continues to climb and our living standards keep improving, the resources that can be extracted from nature are finite.This imbalance is causing future uncertainty and conflicts between nations. To attain sustainable levels of social activity, it is essential that we utilize untapped resources and waste.

Leveraging TODA’s technological expertise, the TODA Group has been turning iron-containing industrial waste and by-products from other industries into its own raw materials, creating valuable materials. Continuing to play a part in a recycling-oriented society with these technological capabilities is both our mission and strength. By extending our co-creation capability, we hope to become a company that is able to provide economically feasible solutions to the issues of waste, its recovery and utilization throughout the supply chain.

2. Switching to high value-added products and small-lot production

In the material and chemical industry of which TODA is a part, large capital investment is often a barrier to market entry. The general structure of this industry is that companies reduce costs by producing in large quantities, requiring large facilities.

By shifting away from this approach and gaining expertise in the design of plants that require minimal initial investment, we want to transform into an organization that can generate profits even through small lot production. To develop cost competitiveness, we will demonstrate comprehensive capabilities in facility design, including low-cost equipment rocurement, IoT utilization, process shortening, energy recovery, and cost reductions during business expansion, conversion and withdrawal. As the number of employees who have been successful overseas is also on the rise, I think this is achievable if we can effectively bring together strengths from both inside and outside the Group.

3. Creating materials that represent game-changers for society

The golden age of magnetic recording materials for audio and video tapes were supported by our facility design and mass production technologies. In today’s world with its constant model changes, there are limits to how well we can compete using our existing facilities and technologies.

At the same time, we can now access and utilize a range of cutting-edge technologies through cooperation between industry, academia and government, such as NanoTerasu*, as well as through open innovation. As an environment where new materials can be created even without significant capital outlays is forming, I believe “the discovery of a world-first material related to iron” is no longer a dream.

*NanoTerasu: A next-generation synchrotron radiation facility on the campus of Tohoku University (Sendai).The facility houses a massive microscope capable of clearly visualizing the properties of materials at the nano-level using synchrotron radiation.

Since I assumed the position of President and CEO in June 2024, engaging in dialogue with a wide range of stakeholders has given me a renewed appreciation for how the TODA Group is supported by its many stakeholders. In particular, our shareholders and investors have not only offered harsh feedback and recommendations, but also shared their expectations and provided encouragement. While this is deeply gratifying, at the same time I feel a deep sense of remorse over our recent financial results and this continued period of no dividends. To meet your expectations, we will devote all our energies to regaining profitability and achieving sustainable growth, with the strengthening of business portfolio management playing an integral role.

Pooling our technology and human capital, we will continue to be a unique manufacturing company that is needed by society. I am certain that a bright future is in store for the TODA Group. We extend our heartfelt appreciation for your ongoing understanding and support, which continue to be the foundation of our growth and progress.