JSP : Corporate Report 2022

ChangeforGrowth

CORPORATE REPORT 2022

Long-term Vision,VISION 2027

Vision

Tobecome A Global Company
for Global Society
	Customers
	and
	business
	partners
Employees	Consumers
	Management policies
Local	Shareholders
communities	and investors

Inspire customers and consumers

Deliver satisfaction to shareholders and communities

Be enthusiastic about our work

Gaining understanding, trust, and empathy as a Company society needs

About this publication

Based on ourcorporate philosophy of Creativelyand Actively

Contributing to Society,the JSP Group develops businesswiththe

aimofrealizing our long-term vision. We have clearly defi ned sustainability management in the basic concept of the 2021-2023 Change for Growth medium-term business plan currently underway. This report contains specifi c information regarding sustainability management and materiality, which is also available on the

JSP website.

Reporting period

April 1, 2021, to March 31, 2022

(Some sections refer to activities occurring on or after April 1, 2022)

Forward-looking statements

This publication contains forward-looking statements regarding management plans, strategies, and performance. These statements are based on Company determinations in light of information available as of March 31, 2022. Accordingly, information contained herein is subject to risks and uncertainties, and actual results may differ materially from those discussed in forward-looking statements.

Contents

Messagefrom the President	3
Our Value Creation Process	11
Financial and Non-fi nancial Highlights	13
Overview
Extrusion Business	15
Bead Business	17
Sustainability
Creating Share Value through
Sustainability Management
-P-BLOCK/ARPRO Transformation Strategy	19
Creating Share Value through Environment-
friendly Products
-Information Disclosures Based on TCFD
Recommendations	21

Sustainability Management

Medium-term Business Plan (FY2021-2023)

Basic Strategies

• Solve customers' andsocial issues

•Make economic value includesocial aspects

•Strengthenmanagementbase

JSP Website https://www.co-jsp.co.jp/english/

Message fromthe President

Accelerating Sustainability Management on the Occasion

of Our 60th Anniversary

Toward Realization of Our Long-term Vision

With deep appreciation for the support of all JSP stakeholders, we commemorated our 60th anniversary on January 24, 2022. Reflecting our long-term vision, VISION2027, we aim to become A Global Company for Global Society.

Around the world, pandemic restrictions on economic activities have been gradually relaxed, and economies are on a recovery track, especially with regard to consumer spending. However, amid the recovery, shortages in the supply of semiconductors and other parts, as well as soaring raw material prices, have combined to drive up inflation.

In Japan, although the impact of restrictions on economic activities and supply chain delays due to COVID-19 are steadily diminishing, prices have been rising and increasing economic uncertainty. This is due to the weaker yen caused by the differences in monetary policies between Japan and Western countries, as well as the impact of the situation in Ukraine.

In such a challenging environment, JSP will focus on the basic concepts of its new medium-term business plan, Change for Growth.

This requires that the value provided be expanded from solely economic value to include social value. As a results, it should be possible for the issues faced by customers and society may be resolved. Moreover, we will strengthen our management base in a bid to further enhance corporate value.

Fiscal 2021 Business Performance

Net sales grew year on year, due to an increase in sales of high-value-added products and product price revisions. At the same time, operating profit declined year on year. This is the result of, among other factors, price increases for a broad range of items, including raw materials which grew rapidly.

Extraordinary losses were mainly due to impairment losses at consolidated subsidiaries in Japan, together with losses stemming from fire damage at a consolidated subsidiary in South Korea.

As a result, fiscal 2021 net sales amounted to ¥114,125 million (up 11.2% YOY). Operating income was ¥4,589 million (down 11.5% YOY), ordinary profit ¥4,868 million (down 11.8% YOY), and profit attributable to owners of the parent ¥2,893 million (down 4.1% YOY).

In the extrusion business, sales volumes rose on increased sales of high-value-added products and the revision of some product prices. Despite the impact of skyrocketing raw material prices, profit also increased.

Sales of STYRENPAPER (foamed polystyrene sheets used in food packaging) and other materials for household products increased, due in part to price revisions. There was an increase in the volume of sales of MIRABOARD, a material used for advertising displays, although the sales volume of materials used for food trays decreased, after sales had marked temporary rapid growth a year earlier. That said, demand remains strong as people still tend to stay at home due to the ongoing pandemic. Net sales increased following product price revisions.

Sales of industrial materials, including MIRAMAT (foamed polyethylene sheets) for industrial packaging, and flat panel displays (FPDs) were higher year on year due to

• significant increase in sales of high-value-added and general-purpose products.
  Meanwhile, sales of MIRAFOAM (extruded board made of foamed polystyrene) and other construction and civil engineering materials decreased; year-on-year sales of materials used in the building construction and housing

Tomohiko Okubo

Representative Director and President

Quantitative Targets

	FY2021 Results
Net sales	¥114.1 billion
Operating profit	¥4.5 billion
Operating margin	4.0%

Targets for Vision 2027

(Year ended March 31, 2028)

¥180.0 billion

¥18.0 billion

10.0%

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markets were about the same; but sales of materials used for civil engineering applications were down.

As a result, extrusion business sales increased 3.9% to ¥39,076 million and operating profit rose 8.0% to ¥2,782 million. Although we anticipate higher sales in fiscal 2022, due to increased sales volumes and product price revisions, we expect raw material prices to continue rising, resulting in lower profits.

In the bead business, sales increased on recovery in demand, mainly in the automotive field. In terms of profit, despite efforts to promote product price revisions, the impact of skyrocketing raw material prices was substantial, pushing down profits.

Despite the impact of restrictions on activities due to the spread of COVID-19 variants and shortages of semiconductors and other parts, there was a moderate recovery in demand and an expanded use of new components in automobiles that, together, resulted in higher sales volumes and net sales.

This was noted in the areas of high-performance products such as P-BLOCK/ARPRO, which is expanded

Sales and profits are expected to increase in fiscal 2022, in line with a recovery in sales volumes and product price revisions.

In the others segment, sales of general packaging materials increased in Japan as sales in the automotive parts, transportation, and other market sectors recovered. In China, strong demand for packaging materials for many types of components resulted in higher sales. This caused sales in the others segment to strengthen 26.2% to ¥6,536 million, while operating profit grew 119.9% to ¥212 million.

In fiscal 2022, sales are expected to expand in line with higher sales volumes and product price revisions, while profits are also expected to rise for the same reasons.

Fiscal 2022 Forecasts

The outlook for the global economy in fiscal 2022 is becoming increasingly uncertain, due to the rising cost of raw materials as geopolitical risks continue to escalate. Other reasons include the absence of any signs of an end to global supply chain disruptions and lockdowns in China in response to the swelling number of COVID-19 cases.

Quantitative targets to be achieved by FY2023 include net sales of ¥120,000 million, operating profit of ¥7,700 million, and an operating profit margin of 6.4%. At the same time, management resources will focus on four growth engines: (1) automotive components, (2) building and home insulation materials, (3) flat panel display (FPD) surface protection materials, and (4) new business domains.

In fiscal 2021, the volume of automotive components sales grew 2% compared with fiscal 2019 (before the pandemic). Automobile production, which is an indicator of demand, continues to recover, but still is impacted by COVID-19 and shortages in semiconductors and other parts.

In fiscal 2022, the number of JSP automotive components used in manufacturing has been on the rise, despite concern over lockdowns in China and market stagnation due to geopolitical risks in Europe.

While the business environment is expected to remain uncertain, we aim to expand business by providing next- generation products compatible with electrification, weight reduction, energy conservation, and recycling requirements.

Regarding building and home insulation materials, the total sales volumes declined 7% compared with that of fiscal 2019. Although orders for homes were firm, delays were caused in new housing starts and home construction by the pandemic and shortages of construction equipment, semiconductors, and other components.

However, demand for energy-saving homes remains strong, and we continue to see higher sales of pre-cut thermal insulation materials, which is our strength. We expect business to grow, as demand for high-performance thermal insulation rises ahead of mandatory compliance with energy efficiency standards in fiscal 2025.

Sales of FPD surface protection materials increased

33% compared with fiscal 2019, achieving targets ahead of schedule in response to expanded production among JSP customers due to greater demand in China for personal computers, displays, and other products. Further growth is expected on higher demand for organic electro- luminescence panels and personal computers, as well as overseas business expansion.

polypropylene that is used for bumper cores, seat cores, and other automotive parts; cushioning and packaging materials for returnable containers for various components; cushioning and packaging materials; insulation and cushioning materials for housing; and impact protection materials for athletic fields.

In Japan and North America, sales of P-BLOCK/ ARPRO increased slightly despite the impact of production adjustments by automakers. In South America, sales increased in the automotive field. In Europe, sales were strong in the automotive parts and other markets. In China and Taiwan, sales in the packaging materials sector increased.

The sales volume of expandable polystyrene bead products, chiefly STYRODIA, decreased because of lower demand for these products in the fisheries and agriculture sectors. Although sales were up, mainly due to price revisions, further action is being taken in response to the ongoing rise in the cost of raw materials.

Sales of FOAMCORE, a hybrid molded product used in prefabricated bathroom unit ceilings and marine floats, increased mainly due to a recovery in demand.

Thus, beads business sales rose 14.4% to ¥68,513 million and operating profit slid 26.2% to ¥2,620 million.

Nevertheless, the global economy is expected to recover as pandemic-related restrictions are eased and countries continue to take measures to prevent the spread of coronavirus infections.

In this difficult business climate, JSP is working on revising product prices to reflect the higher cost of raw materials, utilities, and logistics, while continuing to address sustainability management issues.

Medium-term Targets, Achievements

As a second step to realizing its long-term goal, VISION2027, JSP launched the Change for Growth medium-term business plan, covering the three years from fiscal 2021 to fiscal 2023.

Under this plan, we will promote strategies aimed at achieving further growth, focusing on the basic concepts of expanding the value provided by JSP in terms of both economic and social value. We will take steps to resolve issues faced by customers and society, and strengthen our management base.

Medium-term Business Plan (FY2021-2023)

Change for Growth

Four Growth Engines

Automotive components			Building and home insulation materials
FY2023 Target	FY2021 Result				FY2023 Target	FY2021 Result
Compared with FY2019	Compared with FY2019				Compared with FY2019	Compared with FY2019
up 23%	up 2%				up 12%	down 7%
• Need for vehicle weight reduction					• Growing demand for energy-efficient housing
• Next-generation products meet need to save energy, recycle				• Expanding demand for high-performance insulation materials

		FPD surface protection materials				New business domains
		FY2023 Target	FY2021 Result			FY2023 Target	FY2021 Result
		Compared with FY2019	Compared with FY2019			Net sales	Net sales
		up 20%	up 33%			¥3.0 billion	¥0.1 billion
	• Growing demand for LCD/organic EL panels and personal computers			• M&A activity
	• Increasing overseas business development			• Active commercialization of currently potential business themes

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In new business domains, we are adding new businesses and M&A projects, while commercializing elements of our existing businesses that show potential. In January 2022, we made a 35% investment in GHEPI SRL, an Italian company, which has injection molding processing technologies. The injection molding market for

plastic products is large. In combining JSP foaming technologies with new injection technologies, we aim to promote the development of high-value-added products. We also plan to create new businesses, by tapping into the multiple synergies with areas of JSP business.

FY2023 Targets Compared with FY2020 Results	Quantitative Targets for FY2023	(Billion yen)
	Net sales		Profit	Net sales	120.0
Operating profit	7.7
	UP17%		UP 49%
		Ordinary profit	7.9
Profit attributable to owners of parent	5.2

Preconditions

• Crude oil price: $50 per barrel

• Exchange rate: ¥105/$1, ¥125/ 1, ¥15/RMB1

GHEPI holds a ceremony in April 2022 to mark its half century in business and the 60th anniversary of JSP.

Results, Forecast, and Plan

		Growth
Net sales	Sales volume	128,000
(million yen)	(FY2018=100)	110	120,000
116,133	113,375		114,125
100	98	102,668	98	103
Crude oil price		93
($/barrel)			78
69
	60
		45
FY2018	2019	2020	2021	2022	2023
				(Forecast)	(Plan)

Margin

Operating profit Operating margin

7,700

(million yen)		(%)
					6,4
5,479	5,083	5,185
		5.1	4,589	4,300
4.7
4.5
			4.0
				3.4
FY2018	2019	2020	2021	2022	2023
				(Forecast)	(Plan)

Strengthening Non-financial Capital

JSP stakeholders increasingly are demanding that we strengthen our efforts in the areas of non-financial capital and information disclosure. We believe investment in human capital is critical to achieving sustainable growth.

To realize the basic concept-to fortify our management base-underpinning our Change for Growth medium-term business plan, we aim to improve our human resources development, augment our level of occupational safety, and foster a culture of a rewarding workplace.

In addition, as part of our Deliver with WOW! management policy that expresses our targeted actions and intentions, we aim to be a company where all employees work with enthusiasm.

Reflecting on the 60 years since our founding- during which time we have expanded through business

integration and the acquisition of overseas companies- JSP has welcomed a diverse array of human resources and cultivated a highly liberal corporate culture. In this atmosphere, which has remained flexible throughout, our diverse human resources-representing different genders, nationalities, and expertise-have interacted and taken on the challenge of creating new value.

Yet, if we are to become a truly global supplier, even greater human resource diversification is necessary. For this, it is essential that we focus more than ever on developing our human resources. To this end, JSP will provide opportunities for growth through a wide range of experiences, in addition to acquiring specialized knowledge related to manufacturing, including foaming technologies, as well as quality and production technologies.

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