Sumitomo Riko : Integrated Report 2023 (High resolution version)

Table of Contents and Links

02 Corporate Overview

30 Direction2: Building a Flexible

and Strong Organization

2023 Annual Report

The Integrated Report 2023 reports on the value creation policy of the Sumitomo Riko Group. In these times of uncertain prospects, we believe that continuing to embody the Sumitomo Spirit of "Banji-nissei","Shinyo-kakujitsu",

03 Our Philosophy

06 Message from the President & CEO

10 Our Business

1. Sumitomo Spirit & Sumitomo Riko Group Management Philosophy
2. Corporate History
3. What Our Group Aim to Be / Purpose

1. Summary of "2022 Sumitomo Riko Group Vision (2022V)"
2. Fiscal 2022 Summary
3. 2029 Sumitomo Riko Group Vision (2029V)

1. 2025 Sumitomo Riko Group Mid-term Management Plan (2025P) Outlook for FY2023
2. Our Business
3. Core Competencies (Two Core Technologies)
4. Core Competencies
   (Examples of Core Technologies and Products)

1. About Environment 2029V
2. Climate Change Initiatives
3. Responding to the Climate-related Financial Disclosure Task Force (TCFD) Recommendations
4. Natural Capital Initiatives
5. Quality Improvement Initiatives
6. Supply Chain CSR Management and Human Rights Policy
7. Risk Management Initiatives

37 Direction3: Creating Value for

a Sustainable Society

and "Fusu-furi" without being bound by past concepts will contribute to the realization of a sustainable society and further accelerate our progress as a company that is needed around the world.

In May 2023, we announced our long-term vision for our 100th anniversary, the "2029 Sumitomo Riko Group Vision (2029V)", and our medium-term management plan, the "2025 Sumitomo Riko Mid-term Management Plan (2025P)". In editing the Integrated Report 2023, in addition to the newly defined Purpose, we reviewed the value creation process for the three management directions and six materialities that form the pillars of 2029V and took into account the social demands for a global sustainability report. We will continue to make efforts to respond to the demands of our stakeholders. We hope you will take a look at our Sustainability Site and give us your honest feedback.

Editorial Policy

13 Strategies for Value Creation

Period covered in the Report

From April 1, 2021 to March 31, 2022 (fiscal 2021). This Report also refers to certain activities that are being undertaken in fiscal 2022 or were carried out in previous years.

14 Feature Articles 2029V

23 Overall Policy Summary

1. Value Creation Model
2. 2029V and 2025P
3. Vision for the Future Society We Want to Realize
4. What We Want to Be in 2029
5. Business fields of Sumitomo Riko Group
6. Approach to Value Co-Creation (Advancement and Fusion)
7. Three Directions and Six Materialities to Realize Our Vision
8. Targets (Public Value and Corporate Value)
9. 2029V Formulation Process
10. Three Directions and Six Materialities of 2029V Key Initiatives for 2025

44 Management Foundation

Boundary of the Report

This Report covers Sumitomo Riko and its Group companies. In this Report, "Sumitomo Riko" and the "Sumitomo Riko Group" are defined as follows.

"Sumitomo Riko" and "the Company": Sumitomo Riko Company Limited

"Sumitomo Riko Group" and the "Group": Sumitomo Riko and Group companies. The term "Group companies" alone does not include Sumitomo Riko.

Group companies may be described as associated companies, subsidiaries or affiliated companies.

Contact Information

Editor： Corporate Planning Department

Contact: Public Relations and Investor Relations

Department

24 Direction1: Developing People

and Peers Who Pioneer the Future

For comments or questions on this report, please contact: TEL +81-525-71-0200 https://www.sumitomoriko.co.jp/english/contact/

For details, please see Sumitomo Riko's website

03

Our Philosophy

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

The Sumitomo Spirit has been refined through the generations based on the Founder's Precepts "Monjuin Shiigaki", which Masatomo Sumitomo, the founder of the Sumitomo family, wrote and handed on to describe how a merchant should conduct business.

The Sumitomo Riko Group, in accordance with the Sumitomo Spirit

Sumitomo Spirit

Sumitomo Riko Group Management Philosophy

In light of the Sumitomo Spirit, all of us at the Sumitomo Riko Group will:

and the Sumitomo Riko Group Management Philosophy, shall strive to be a group of companies worthy of society's trust by conducting business activities in an honest manner.

1. Provide superior products and services to meet customer needs based on technological innovation.
2. Place top priority on safety and work to ensure the safety of people and society.
3. Strive to protect the global environment and to contribute to creating better communities.

1. Maintain a high standard of corporate ethics and observe all laws and regulations to earn public trust and confidence worldwide.
2. Foster an invigorating corporate culture that respects our employees' diversity, personal qualities, and individuality.

04

Our Philosophy

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

1929

First

Founding

From Foundation to Expansion of the Business Scope

1930

Company name changed to

Kabata Chotai (Belt) Co., Ltd.

1937

Joined the Sumitomo Group. Company name changed to Tokai Rubber Industries, Ltd.

(using Kanji for Rubber in the Japanese name)

1961

Company name changed to Tokai Rubber Industries, Ltd. (Changed Kanji for Rubber to Katakana, different Japanese character)

1968

Entered automobile interior business

2020

Released a Thin-filmHigh-heat

Insulation Materials "Finesulight"

2013

Started sales of "SR Soft Vision" series body pressure sensors, entered health and nursing business

2008

Started sales of "TRC Damper", earthquake countermeasures for wooden houses

05

Our Philosophy

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

What Our Group

Aim to Be

Purpose

Global Excellent Manufacturing Company

A company that constantly asks itself what kind of Monozukuri (manufacturing) is needed by society and continues to pursue it with a global perspective

To realize the comfort of the society by maximizing the potential of materials through Monozukuri

06

Message from the President & CEO

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

Looking back Business Environment

Fiscal year 2022 marks the final year of the "Mid-term Management Vision (2022V)" formulated and announced in May 2018. Since I became the President in June 2020, the external environment has become even more uncertain due to the pandemic caused by the new coronavirus infection, the fragmentation of the international community, concerns about the stable supply of energy, as well as the situation in Ukraine and financial market trends in Europe and the United States.

In the automotive field, where we operate, industry changes as represented by CASE are steadily progressing, although there are differences among countries and regions. In the general industrial products

Representative Director and President & CEO

Kazushi Shimizu

field as well, there is a need to respond to changes in demand for new lifestyles and diverse values.

In times like these, when it is difficult to foresee the future, it is important to always be prepared for change. "Transformation into an organization that responds flexibly to change without being bound by past concepts" is the slogan that I have upheld since I became president. As the business environment changes, we will break away from past practices and promote business operations that respond to these new changes with all of our group employees.

■2022V Business Strategies

• Creation of new businesses and new customers

Consistent

Growth

Results & Issues

Results of 2022V Initiatives

We have achieved steady growth through the implementation of the growth strategies set forth in our Mid- term management vision. In 2022V, we aimed to build a foundation for growth toward 2029, the 100th anniversary of our founding, by responding to major changes in the business environment, which is said to

Organizational

• Global sales expansion

● Creating strong bases that outstrip the competition

be a once-in-a-century transformation of the automotive industry.

2022V Theme / Strategy

Reinforcement ● Reinforcement of global business foundations

In 2022V, we have worked on business operations under the vision themes of "Steady Growth" and "Strengthening Our Structure. As part of our efforts to achieve "steady growth", we expanded sales to European and U.S. manufacturers, developed products for electric vehicles and automated driving, and launched new environmentally friendly products such as "Finesulight". In addition, through collaboration with the National Institute of Advanced Industrial Science and Technology (AIST), we improved our development environment by establishing a test course. In order to strengthen our corporate structure, we promoted optimization of global production bases, reorganization of group bases, and the creation of a quality control system by introducing digital technology.

2022V Targets (Corporate Value and Public Value)

In terms of corporate value (financial targets), consolidated net sales achieved the target despite a decrease in automobile production volume (down 20%) compared to the plan, partly due to an increase in market share and the impact of foreign exchange rates. Operating profit and capital efficiency (ROA, ROE) did not meet targets due to production fluctuations caused by supply shortages of semiconductors and other products and soaring costs such as raw material and fuel. Public value (non-financial targets) made steady progress through the implementation of various measures.

■2022V Objectives

*Capital expenditures: Based on purchase of property, plant and equipment and intangible assets

07

Message from the President & CEO

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

Overview of FY2022

In FY2022, the economy generally showed a moderate recovery, although there were differences by region. On the other hand, the outlook remained uncertain, as inflation remained at a high level against the backdrop of supply-demand crunch caused by supply constraints, the protracted situation in Ukraine, and instability in the financial markets.

Despite this difficult environment, we were able to return to profitability thanks to a recovery in production volume by our customers and the promotion of structural improvement through management efforts such as rationalization of production at our company and reflection of raw material and fuel prices in selling prices.

Although the outlook for the global economy is expected to remain uncertain, we are committed to further corporate growth to meet the support and expectations of our stakeholders by vigorously promoting further improvements in our structure, including global cost control and optimization of our bases.

Initiatives for "Steady Growth"

The Sumitomo Riko Group is required to be actively involved in environmental and social issues to realize a sustainable society, such as carbon neutrality. In addition to rapid technological innovation in the automotive industry in response to CASE, the General Industrial Products Division is required to steadily promote its business in fields indispensable for the construction of social environmental infrastructure, such as infrastructure and living environments.

In FY2022, many of our products were adopted for use in Toyota Motor Corporation's BEV "bZ4X". In the anti-vibration rubber division, in addition to products for suspensions, our "eAxle mount" for the "eAxle", the heart of the BEV, was adopted, as well as "cooling pipes for electrical systems" in hose division, and the new eAxle cover, which is compatible with eAxle in the sound insulation division.

In the general industrial products division, our anti-vibration rubber for rolling stock has been adopted by JR Tokai's Series

315 and HC85. The "HC85 Series" is an environmentally f r i e n d l y t r a i n t h a t u s e s a " hy b r i d sys t e m " t o r u n o n a combination of electricity generated by the diesel engine and electricity from storage batteries charged by energy generated during braking and other operations. We will continue to contribute to the safety, security, and comfort of everyone through the provision of better products for future means of transportation by combining the technological capabilities we have cultivated.

In addition, R&D and product development in new areas are also progressing in various fields. "Finesulight", a thin-film high thermal insulation material, has been adopted by several companies for use in factories and facilities, ahead of automotive applications such as electric vehicles, where we are targeting opportunities for adoption. Its introduction into factories and facilities is expected to improve the working environment by lowering the temperature of work spaces, in addition to improving thermal efficiency and saving energy for air conditioning and other purposes. Most recently, the product has been used in a wide range of applications, such as for outdoor goods, taking advantage of its heat insulation effect.

In addition, we are actively working toward the co-creation of new businesses, such as participating in the Open Innovation Platform for Cellular Agriculture led by Integriculture Inc. and developing a biomimetic system, an alternative tool for animal experiments, in collaboration with Ginrei Lab Inc. In addition, as part of our efforts to address the circular economy, we have begun collaboration with the U.S. biotechnology company Lanzatech Global, Inc. and are working from a long-term perspective to realize a recycling-oriented society in which waste is recovered and reused.

Thus, our new products are being used in new areas to help realize a sustainable society. In order to fully utilize our strength in materials, we will further accelerate our research and development to create products that meet the needs of our customers and end users, while actively incorporating all forms of partnerships, alliances, and open innovation, as well as synergies within the Group.

Initiatives to

"Strengthen Our Management Structure"

In the midst of the Corona pandemic, the war in Ukraine, and prolonged inflation, our group is working to strengthen our management structure. With regard to our response to rising raw material and fuel prices, we recognize that our company-wide efforts to reduce costs and curb expenses, as well as our efforts to reflect cost increases in selling prices, have borne fruit, and profitability is improving. We are also continuing our efforts to rebuild an optimal global base structure.

Although the reorganization of Fuji Susono Plant (Chemical and Plastic Products and Automotive Anti-Vibration Business), which has been implemented since FY2021, has been completed, we have decided to proceed with a more in-depth reorganization of the chemical products business, which handles parts for office equipment, in order to strengthen the earnings structure of the business amid the continuing contraction of the office equipment market. Production of mainstay products will be consolidated at domestic and overseas subsidiary sites to maintain production capacity.

In FY2022, we have begun to increase the production capacity of our group company based in Mexico (S-Riko de Querétaro, S.A.P.I. de C.V. (SRK-QRO) ), through a plant expansion. This is part of our strategic investment to position SRK-QRO as one of the hubs for automotive anti-vibration rubber production in North America and to ensure prompt and stable delivery of high-quality products to our customers.

As for our European bases, we are also in the process of strengthening our structure, mainly by expanding sales of products mainly for electric vehicles and cost control. We will continue to review the roles of our bases across the group in response to changes in the external environment, and optimize the allocation and utilization of management resources based on the premise of building a multidimensional supply chain.

08

Message from the President & CEO

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

2029 Sumitomo Riko Group Vision (2029V)

At the end of May 2023, we announced our management vision "2029 Sumitomo Riko Group Vision (2029V)" ending in fiscal 2029 and our medium-term management plan "2025 Sumitomo Riko Group Mid-term Management Plan (2025P)" ending in fiscal 2025.

We will continue to expand the scope of our challenges through co-creation to become a company chosen by society for the next 100 years.

2029 Sumitomo Riko 100th anniversary

One team for the next 100 years

2029 Sumitomo Riko Group Vision (2029V)

A leading solution provider taking on social challenges by aggregating whole resources of Sumitomo Riko and its partners

For the 100th anniversary of our founding

In 2029, Sumitomo Riko will celebrate the 100th anniversary of its establishment. Since our founding, we have undergone numerous changes in social and economic conditions, but the entire company has worked together to make steady progress.

The flow of social change and technological innovation is now too fast to compare with the past. Whether or not a company can create products that match the times with a sense of speed will play a major role in its survival.

We have formulated the "2029 Sumitomo Riko Group Long-Term Vision(2029V)" in preparation for the 100th anniversary of our founding. In formulating the vision, we asked our mid-career employees, who will be responsible for the future of our company, to discuss the vision, rather than management like ourselves. We asked them to take the viewpoint that "Sumitomo Riko will continue to be the company of choice in society for the next 100 years".

Mid-career employees' desires for 2029V

Regarding "A company that continues to be chosen by society", mid-career employees proposed "To realize the comfort of society by maximizing the potential of materials through Monozukuri " as the Purpose of the Sumitomo Riko Group. The proposal, which includes opinions from our overseas bases, well expresses our universal strengths and values as well as the thoughts of our mid-career employees, and we will work to disseminate it throughout the Group through the 2029V.

As for the future business environment, 2029V expresses our strong desire to be a change agent, rather than a wait-and-see or follow-along attitude in the face of unpredictable changes in the business environment that will become the norm. Looking ahead to 2029 and beyond, we have set "a green and comfortable society where nature, cities, and human space are connected" as the vision of the future society that the Sumitomo

Riko Group should realize. In addition to "comfort", which is the value that the Sumitomo Riko Group provides to its customers, this vision summarizes the social issues to be addressed with the keyword "green" at the core.

What We Want to Be for 2029 and Three Directions

Our goal of what we want to be in 2029 is to be "A leading solution provider taking on social challenges by collecting the whole resources of Sumitomo Riko and its partners". This expresses the image of the Sumitomo Riko Group as a company that continues to create and provide new value through the advancement and fusion of its businesses and technologies by taking the initiative in solving social issues in the vision of the future society to be realized through collaboration within and between business divisions and with external stakeholders.

The group-wide policy to realize "What we want to be" is based on three directions: "Developing People and Peers Who Pioneer the Future", "Building a Flexible and Strong Organization", and "Creating Value for a Sustainable Society". The reason for using the word "direction" instead of "management strategy" is that we want everyone to move forward toward the same goal while responding flexibly to change, rather than to set specific strategies in an era of rapid environmental change, when the future is unpredictable.

Meanwhile, a specific three-year business plan for 2029 was simultaneously announced as the "2025 Sumitomo Riko Group Mid- term Management Plan (2025P).

Sumitomo Riko's Form of Value Co-Creation

Sumitomo Riko is a rare company that can handle both materials and products. Developing products that can take advantage of our polymer material technology and comprehensive evaluation technology is something we should focus on in order to become a sustainable company. In 2020, we jointly established a collaborative laboratory with the National Institute of Advanced

Industrial Science and Technology (AIST) and completed a test course in October 2021. By collaborating with others, we will be able to utilize AIST's advanced technologies and knowledge as well as its human resources and R&D facilities, thereby expanding the scope of our challenges. We will continue to collect and analyze data and co-create value together with our customers.

Simplicity and Openness

Flexible Business Domains

In June 2020, when I took office as president, I reorganized the non - automotive business into the Industrial Functional Components Business Division, bringing together the non- automotive fields into a single entity.

This was done because I wanted the vast amount of technology and knowledge we have accumulated and the sales channels we have pioneered to be widely utilized across business divisions within the company, and also in order to create an environment that would enable us to more boldly create new business opportunities. Frankly speaking, it is difficult for products in the non-automotive field to generate large sales and profits like those in the automotive field overnight.

However, I believe it is important to try first. Of course, as a company, we do not need to do anything out of the ordinary, and I believe that steadily and honestly moving forward with what we have been doing will lead to Sumitomo spirit of "Shinyo- kakujitsu" and to becoming a company that is required by society.

I am proud that Sumitomo Riko is a company that can respond quickly to change. If I were to describe our company to young people, I would confidently tell them that we are "a company that can contribute to society", "a rare company that handles both materials and products", and "a company that can respond quickly to change. ......

09

Message from the President & CEO

Corporate Overview Strategies for Value Creation Management Foundation

Our Philosophy Message from the President & CEO Our Business

2025 Sumitomo Riko Group Mid-term Management Plan (2025P)

Based on the backcast from 2029V and the continuing issues from 2022V, 2025P was formulated as a three - year Mid - term management plan through 2025. The theme of 2025P is set to "further improve profitability and strengthen the management foundation for sustainable growth", and we will strengthen profitability, which was the remaining issue in 2022V, and strengthen the management foundation that can flexibly respond to changes in the external environment.

we will seek to enhance the sophistication and efficiency of our management base by strengthening our response to climate change, human capital management, manufacturing, and research and development. With regard to investment strategies for sustainable growth, we will strengthen our structure and constitution by allocating investment resources in a timely and appropriate manner based on business strategies and investment profitability criteria after careful consideration of the current situation, and by creating new businesses through the integration of core technologies as well as the deepening of existing businesses.

2025 Sumitomo Riko Group Mid-term Management Plan (2025P)

Forecast of Business Results for FY2023

In August, we revised the earnings forecast disclosed in May 2023. This is due to the fact that the automobile production volume in the first quarter was higher than the forecast at the beginning of the year, as well as a revision of the assumed exchange rate, which is the premise for the earnings forecast. As of now, the outlook is uncertain due to geopolitical risks, including the protracted situation in Ukraine and ongoing global inflation. However, with the economic recovery from the Corona pandemic, the settling down of semiconductor supply, and the normalization of the supply chain, we expect our customers, especially in the automotive industry, to

Initiatives for "Further Improvement of Profitability"

We will promote "Further Improvement of Profitability" through the completion of business restructuring, cost and cash flow control, and business-specific evaluation and portfolio management. Specifically, we will ① place priority on improving core business profit and continue to make every effort to reorganize the optimal base structure that will remain from 2022V, ② promote improvement of final profit through various measures and enhance cash generation capability, and ③ firmly establish ROIC improvement activities . By focusing on these points and implementing measures, we aim to achieve more efficient and stable earnings and financial foundation.

Initiatives for "Sustainable Growth"

Based on the 2025P growth strategy, in the automotive products division, we will establish a well-born manufacturing foundation under an optimal global production system and aim for sustainable growth in all directions through collaboration. In the general industrial products

Theme

Corporate Value

(Financial

Goals)

Public

Value

(Non-Financial Goals)

Further enhancing profitability and Strengthening the management foundation for sustainable growth.

increase their production volume over FY2022. To improve profitability, we will continue our efforts to reduce costs and curb expenses while working to reduce or eliminate the time lag in the reflection of selling prices in response to fluctuations in the prices of raw materials, fuels, and other commodities.

division, we aim to create new business opportunities by steadily capturing demand, building a flexible organizational foundation, and deepening and integrating technologies in each business. In addition,

*1 DX core personnel: Personnel engaged in leading the planning of the utilization of IoT and AI to the actual implementation in their department

*2 DX data analysts: Personnel who use IoT, AI and other specialist IT tools for work purposes in their department

(Note) Business profit is calculated by subtracting Cost of sales and Selling, general and administrative expenses from Net sales and adding Equity in earnings / losses of associates.