Toda Industries' medium- to long-term growth strategy. (3) Materials for LIB. The main body of the business is Toda Advanced Materials Canada, which handles precursors of cathode materials as a consolidated sales target, but the main business is BTBM, which is accounted for by equity. Therefore, in this 'Vision2026,' specific revenue and profitability targets were not provided, but the business is planning to expand in response to global demand expansion with business partner BASF. Currently, the main cathode materials offered by BTBM are high nickel-based, and it is expected that high-end cars will continue to adopt nickel-cobalt aluminum lithium (Hi-Nickel NCA) in terms of cruising distance, etc. It has started supplying NCM-based cathode materials to PPES and plans to increase annual production capacity of high nickel-based cathode materials to 45GWh worth of 0.06 million tons as battery cell capacity and start production in the latter half of 2024. While BTBM had mostly served NCA (cylindrical battery) cathode materials until now (with Sumitomo Metal Mining Co., Ltd. <5713> being the domestic leader and BTBM in second place), it will supply NCM (angular/laminate type) cathode materials to PPES, for which Nippon Nyukazai Co., Ltd. is currently the domestic supplier. However, expansion is expected in line with Toyota Motor's domestic EV strategy in the future. Toda Advanced Materials supplies cathode material manufacturers that supply EV vehicles, but its current business is struggling because it is at the end of its model life, and it is forecast that its earnings will continue to stagnate in the fiscal year ending March 2025. Countermeasures are also being taken to respond to the next-generation model, but the results are expected to begin to emerge in the fiscal year ending March 2026 and beyond. On the other hand, Toyota Motor announced plans to invest a total of $13.9 billion in battery factories in the United States, and it is expected that annual production will exceed 30GWh by 2030. Therefore, there is also a possibility that the company will participate as a new user, and its results are awaited. However, there is also a growing global trend to review EVs, and in fact, Panasonic Holdings has revised its plan for the EV battery business aimed at exceeding 3 trillion yen by the fiscal year ending March 2031 due to a decrease in the operating rate of domestic factories, among other factors. There may also be a situation where earnings stagnate for a while, although the LIB-related business for automotive use can be expected to grow in the long run.

3. Functional Pigment Business

As for functional pigments, the market has matured, and in "Vision2026," we aim to streamline the business and continue profitable business, as well as aim to achieve early realization of next-generation business through industry-academia-government cooperation centered on the environment. Therefore, revenue targets for the same business are expected to be operating profits for the year ending March 2027, rather than an operating loss of 0.7 billion yen after common expenses are deducted in the year ending March 2024.

Specifically, in the year ending March 2024, we will record a special loss of 2,184 million yen as an impairment loss, and measures such as depreciation, high-cost inventory reduction, etc. will be implemented, and the decrease in losses will gradually continue as sales slowly recover.

(1) Pigment Business

In the year ending March 2024, the largest sales scale for copiers and printers, which is the largest in terms of sales scale, is 3.2 billion yen due to the impact of the downturn in China. However, the wave of paperlessness is unavoidable, and it is expected that profitability will be ensured by high-profit color products, etc. For paint applications, it is expected that the impact of the transfer of Toda Kogyo will result in a slight decrease in revenue in the year ending March 2024 of 3.1 billion yen. It is also expected to respond to the section with a focus on profitability, such as automotive transparent coatings and cosmetics (developmental products).

(2) Environment-Related Materials

The company has been providing iron oxide, which has catalyst activity that suppresses the generation of harmful substances when burned, and iron oxide with a function of purifying soil and groundwater as a product, for the formation of a circular society. The current sales for the environment-related market in the year ending March 2024 are 2.2 billion yen, and the center is the Hydrotalcite business included in the electronic material business. Hydrotalcite is generally represented by Mg/Al-type carbonate layer double hydroxides (LDH), and chloride ions (Cl-) and other anions are adsorbed by ion exchange with carbonic acid ions (CO32-) between the layers, and carbonic acid ions (CO32-) contain infrared rays. The company has been providing various shapes tailored to various applications using wet synthesis technology. However, demand for the same business has not increased due to the spread of the novel coronavirus infection and the current sluggishness of the Chinese real estate, and prices have fallen due to the proliferation of manufacturers in China. Therefore, it was decided in May 2024 to dissolve the business partnership with Sakai Chemical Industry Co., Ltd., a collaborative partner. However, the same business has the potential for a revival in demand that is different from conventional demand. Specifically, demand as a chlorine capturing agent for semiconductor encapsulants and as a particle design that corresponds to wire miniaturization is expected, especially for semiconductor encapsulants that have a high risk of disconnection due to miniaturization.

We are promoting the commercialization of next-generation businesses through industry-academia-government cooperation. Specifically, we are promoting the development of a process and system for producing CO2-free hydrogen by the methane direct reforming method (DMR method) through commissioned business of the New Energy and Industrial Technology Development Organization (NEDO), in order to achieve carbon neutrality. In August 2023, a commercial-scale hydrogen production plant using the DMR method was installed in Toyotomi-cho, Hokkaido, and high-purity hydrogen was produced from natural gas accompanying hot springs composed mainly of methane without directly emitting CO2. At the same time, the hydrogen produced is supplied to nearby users, and a hydrogen supply chain on a local production for local consumption basis is being constructed. In addition, the carbon dioxide byproduct is marketed as multi-walled carbon nanotubes (CNTs) with high conductivity. Using unused natural gas that self-spouts in Toyotomi-cho around 2025 and beyond, we will establish a commercial-scale production technology for hydrogen and CNTs using the DMR method, along with the water storage, transportation and supply system for hydrogen established by Air Water Co., Ltd., and conduct an application search and performance evaluation of CNT powder, aiming for early social implementation of the entire system.

In addition, the company is also conducting research on utilizing sodium ferrite as a CO2 solid recovery material in order to achieve carbon recycling. The solid recovery material absorbs CO2 contained in combustion exhaust gas and releases it at around 100℃. It can be repeatedly used as a material that contributes to carbon neutrality and has attracted attention. In July 2022, the company, along with Air Water and Saitama University, proposed the development of innovative CO2 separation and recovery technology using Na-Fe oxide as part of the Green Innovation Fund/CO2 Separation and Recovery Technology Development Project, which was publicly solicited by NEDO and was adopted. The separated and recovered CO2 is expected to be used for fundamental substances, fuel, concrete admixtures, etc.

Overall, it is expected that academia-government-industry cooperation will not reach mass production under Vision2026 and will take time to contribute to revenue, but the goal for the fiscal year 2030 is revenue of 1 billion yen and operating profit of 0.1 billion yen, and expectations are also high for the company's efforts towards a decarbonized and circular society.

(Written by FISCO Guest Analyst Hiroshi Okamoto)