Update on Initiatives for Realizing Management that Focuses on Cost of Capital and Stock Price

Current Analysis and Initiatives

Hokko Chemical Industry Co., Ltd. conducted an analysis and update of progress on initiatives aimed at realizing management focused on cost of capital and stock price at the Board of Directors meeting on January 13, 2026. In fiscal 2025, it recorded 345 million yen in gains on sale of investment securities due to partial divestment of strategic shareholdings, and treasury stock acquisitions reached 1,199 million yen including amounts decided in the previous fiscal year. ROE remained above 8%, and PBR improved to 0.80x due to stock price appreciation. With an eleventh consecutive year of forecasted dividend increases, the dividend for fiscal 2026 is projected at 54 yen, with a payout ratio of 31.2%. Governance strengthening measures include the establishment of a Nomination and Remuneration Committee and plans to introduce a performance-linked stock compensation system for executives.

Future Policies and Growth Strategy

Continuing the policy formulated on January 12, 2024, the company aims to enhance corporate value over the medium to long term. It will invest intensively in growth strategies, targeting capital profitability improvements with ROE above 8% and ROIC above 6%. The financial strategy assumes expansion of growth investments and establishes a policy to reduce strategic shareholdings to below 20% of net assets by fiscal 2030. Shareholder returns will adopt a progressive dividend policy aiming for dividend increases in line with profit growth. The company will promote restructuring of production systems for the agrochemical and fine chemical businesses and capital investment, advancing the specialization of the Okayama plant for the fine chemical business. Expansion of IR and SR activities will continue to strengthen dialogue with shareholders.