NIPPON YAKIN KOGYO CO., LTD

Celebrating the 100th anniversary of our establishment

The year 2025 marks a great milestone for us: the 100th anniversary of our establishment. Looking back on our establishment, the 1923 Great Kanto Earthquake had led to the world realizing the importance of first-response firefighting, and we began our endeavors by manufacturing fire extinguishers in 1925. At that time, fire extinguishers used gunpowder as a detonator to eject the extinguishing agent. After shifting its emphasis to the pyrotechnics business with the Company’s advanced technology related to gunpowder, those in upper management looked ahead to the next generation, focusing on the social need for domestic production of alloys. In 1935, we began manufacturing stainless steel. Then, as Japan entered a period of rapid economic growth, we invested in equipment such as a 60-tonne electric arc furnace and a hot rolling mill to meet growing demand and improve quality, and built a highly competitive mass production system.

Though we have had several challenging business periods since then, we are here today because of the support of our stakeholders, and also because of our own persistent efforts to develop steel grades, improve facilities, and expand overseas business to adapt to market changes, while always looking ahead to the future. This spirit of consistent challenge in production is still alive and well in the Company today.

The stainless steel and high-performance alloys that are currently our mainstay products are used not only for general consumer goods but also as part of social infrastructure, such as structures and production facilities, and continue to provide value over the long term because of their excellent functionality as well as high recyclability and long product lives. In an age when both companies and products are expected to be sustainable, I believe that the mission of our management is to continue to take on the challenge of creating new products and value that people and society demand for the next 100 years.

The business environment we face remains highly uncertain. A complex set of external factors is affecting our business activities, including soaring resource and energy prices, including sharp fluctuations in the price of nickel, as well as geopolitical risks, labor shortages in Japan due to the declining birthrate and aging population, and exchange rate fluctuations and tightening international regulations.

In this environment, our results for FY2025 resulted in lower revenues and profits compared to FY2024. The decrease in profit was due to lower selling prices as the price of nickel, a core raw material, switched to a downtrend, and due to the product mix, including a decline in demand for products in high-performance alloys. Although sales volumes of both general stainless steels and high-performance alloys increased, they did not reach the targets set at the beginning of the fiscal year.

In addition, one of the factors that affected our performance was the changing environment in our major markets, especially in China, which requires a flexible and rapid response. In the Chinese market, demand for stainless steel is declining due to economic stagnation. Furthermore, the sales volume of high nickel heat-resistant alloys declined due to delays in solar-related projects and other factors, which had a major impact on us, given that the high-performance alloy field to China accounts for approximately 40% of our overseas sales. To address this situation, we will continue to expand into other fields and develop overseas markets outside of China.

Moreover, the stagnant Chinese economy has led to more low-cost general stainless steel produced in China being exported to Japan, putting pressure on the domestic market. As a measure against it, we are working to differentiate ourselves in areas other than pricing by ensuring reliable delivery times and quality, offering better after-sales services, and increasing the ratio of niche steel grades and items that are difficult to replace with imported materials. Furthermore, we are working to build sustainable business relationships by gaining customer understanding of appropriate pricing. In many conversations of mine with our customers since serving at the Corporate Marketing Division, I have realized that our strength is the consistent improvement of our meticulous sales and delivery system and our ability to make proposals that meet niche needs through close communication with a wide variety of customers. We intend to continue providing this value going forward.

Meanwhile, with regard to the U.S. market, we are closely monitoring ｍovement in tariff policy. Sales ratio to the U.S. account for about 2% of total sales, so the direct impact is not significant. However, sales volume to some customers has already been affected, and the future outlook is difficult to predict. Furthermore, since some products processed at our sales destinations are exported to the U.S., we must continue to be vigilant in dealing with demand fluctuations, including those in other regions. Note that U.S. tariff policies are not exclusively negative for us. If U.S.producers, who are our competitors, also have to pay tariffs on raw material imports, their costs may increase. This means that our relative competitiveness against them will increase in markets outside the U.S. In light of the slowdown in the Chinese economy, we intend to take advantage of this opportunity to expand our market to more diverse countries and regions going forward.

Given this business environment, we are steadily expanding sales of high-performance alloys as set forth in Basic Strategy [1] of our Medium-Term Management Plan 2024 (April 1, 2023–March 31, 2026). Although China is in an adjustment phase with an economic slowdown and financial instability, the fact remains that it is a huge market. We will continue to strengthen sales of high-performance alloys in anticipation of rising demand in the oil and gas sector, future expansion in hydrogen-related fields, and a future recovery in solar-related demand. However, in the interests of future growth and risk diversification, we will not focus solely on the Chinese market, but will also strengthen efforts to expand sales of high-performance alloys in India, an area of remarkable economic growth, and in neighboring regions such as the Middle East, using India as a foothold.

As part of this effort, we opened a local subsidiary in India in August 2025. India is appealing in that it is the country with the world’s largest population, which is expected to lead to increased investment in infrastructure development and energy-related projects due to growing domestic demand. In addition, we are geographically closer to this market than our competitors in Europe and the U.S., giving us an advantage in terms of delivery time. In fact, for environmental and energy-related applications in the Middle East and demand for flue gas desulfurization equipment has been strong.

I myself have experience with sales activities in India; this is an area where you must be tough in negotiations. Business meetings are often protracted, and there are limits to what can be accomplished solely on business trips. Therefore, it is very important to establish a local base and build relationships of trust through repeated presentations and proposals while taking the other party’s point of view into consideration. With the establishment of this local subsidiary, we will strive to capture further demand through such dialogue.

As a growth area, we are focusing on hydrogen infrastructure. Materials used in a hydrogen environment require test values obtained under various conditions. Though we currently outsource testing, to enable us to accumulate expertise internally, we are in the process of implementing a materials evaluation testing facility in a hydrogen environment on the Kawasaki Plant premises, scheduled for completion by the end of March 2026.

With respect to strengthening our production framework as stated in Basic Strategy [2], a new cold rolling mill equipped with state-of-the-art technology went into full-scale operation in December 2024. Until that time, the production efficiency of our cold rolling process has declined with growing numbers of high-performance alloys, products with thin sheets, and other products with high manufacturing loads. However, this equipment eliminates these problems and improve quality, production speed, and safety. The work environment has also been dramatically improved by increasing the collection capacity of oil fumes generated during rolling, leading to easier work and greater retention for employees.

The carbonless nickel smelting initiative at the Oheyama Plant is also making steady progress. This is an initiative to break away from the conventional smelting method of mainly using imported nickel ore and coal, and to utilize recycled raw materials and renewable energy, with the goal of reducing CO₂ emissions intensity of the Oheyama Plant by 70% in FY2031 compared to FY2014. Since diversification of recycled raw materials is an important measure that will directly lead to greater competitiveness, such as improvement of energy intensity and reduction of procurement costs, we are currently conducting tests to gain knowledge on about 200 types of recycled raw materials in cooperation with technical staff at production sites and our research division. Since the rotary kiln that smelts ferronickel* is in constant, 24-hour operation, we continue to conduct large-scale tests several times a year using the actual equipment when it is idle. Through these efforts, the usage rate of recycled raw materials reached 58.3% in FY2025. Furthermore, in July of 2025, work was completed to convert the kiln’s fuel from coal to LNG and renewable fuels, and operations with the new fuel began in August.

Human resources are the most important management capital for sustainable growth. How to enhance human resource capabilities is an unending topic of importance for companies, and we are committed to hiring and training diverse human resources with a view to sustainable growth of our business. One of the themes we are focusing on is the utilization of diverse human resources, including women’s empowerment. In order to make competitive proposals and adapt flexibly in a rapidly changing business environment, it is necessary to have multifaceted perspectives and generate new ideas and concepts. Therefore, we have set a goal of increasing the percentage of women hired in career-track positions to at least 20%, and we are working to hire and train women under this goal. We also have an urgent need to expand our global human resources who will be responsible for expanding sales of high-performance alloys overseas, and we are actively recruiting, including mid-career professionals.

In addition, it is necessary to create an environment in which the talent we recruit are motivated and can grow while demonstrating their full potential. Our new Human Resource Management System, which took effect from FY2024, was established with these issues in mind, aiming for merit-based promotions regardless of seniority, and rewarding employees based on fair and transparent evaluations. We will also conduct a survey of employees, who are responsible for carrying our organization forward, to understand the current situation, visualize and share organizational issues, and utilize the results in a new institutional design to improve employee satisfaction.

In June 2025, the Company transitioned to become a company with an Audit and Supervisory Committee in the interest of stronger corporate governance.

This has strengthened the supervisory function of the Board of Directors and enabled faster decision-making with respect to corporate management under the appropriate supervision of the Audit & Supervisory Committee.

Going forward, certain authority will be delegated from the Board of Directors to the executive side, and we will enhance deliberations at the Board of Directors regarding management plans and strategies.

Envisioning our ideal state over the next century

FY2026 marks the final year of the current Medium-Term Management Plan. Although the business environment will remain difficult to forecast, we will work as a unified Group to grow our sales and exceed expectations by capturing demand in the environmental and energy fields, especially in the target markets of India and the Middle East, using our foundation of sales in the stable domestic market.

Meanwhile, discussions will be held to formulate the next Medium-Term Management Plan. In essence, we expect to include measures founded in the development of new high-end high-performance alloy products to grow profits, new capital investment and deployment of advanced proprietary technologies, enhancement of human capital, and DX and IT strategies. As for target values, we intend to be careful in our assessments, as the sales volume target deviated significantly from the target in the current Medium-Term Management Plan.

There is one more thing that I would like to address as we formulate the next Medium-Term Management Plan: to re-envision the ideal state for Nippon Yakin Kogyo. This is because I believe that in today’s uncertain times, it is essential to have a management philosophy that is the origin of value creation, and a sense of direction as a company that works in tandem with this management philosophy. This is to create an organization that is resistant to change, and to continuously increase corporate value through swift planning and implementation of diverse measures.

Therefore, over the past year, I have had a series of open discussions with our production, research, and other divisions, on themes such as which challenges we want to and should take on, what strengths and challenges we have and face, and what kind of company we want to be. Incorporating feedback from the field and advice from outside directors, we will reassess our business environment and the Company’s strengths and weaknesses on the three-year, five-year, ten-year timeframe and beyond, identify key issues, and develop specific strategies and measures to address each.

As I envision the future, my own desire is to make Nippon Yakin Kogyo the global leader in high-performance alloys. To do so, we must be willing to compete not only with existing competitors, but also with new entrants such as those from China and India, taking our fight to the global stage. Competition is fierce and not for the faint of heart. However, it is my strong hope that we can prevail with a competitive mindset only gained by throwing ourselves into such a battlefield, and that we can emerge with greater strength than before.

As President, I believe my most important mission is to inspire our employees—who are known for their diligence, integrity, and strong sense of responsibility—through continuous dialogue, cultivating a spirit of challenge needed to engage in the fiercely competitive global market. I would like to taking on challenges with the entire company, including sales, production, research, and purchasing, to work together as one.

On the occasion of our 100th anniversary, it is my promise that we will continue to strengthen relationships with our stakeholders and aim to enhance our corporate value in coexistence and harmony with society and the global environment. As we move toward the next 100 years, we will strive to create a company in which we, the current generation, and the next generation of employees can be proud to work. I offer my sincerest thanks to all stakeholders for their continued understanding and support of our endeavors.

* An umbrella term for alloys of iron and nickel that are used as intermediate materials for iron and steel products