Topy Industries : Report 2023 English

TOPY INDUSTRIES, LIMITED

Art Village Osaki Central Tower

1-2-2, Osaki, Shinagawa-ku, Tokyo, 141-8634

TEL: [phone] FAX: [phone]

http://www.topy.co.jp

[Overview of ofcial X (formerly Twitter) account]

Account name: Topy Industries, Ltd.

User name: @TOPY_INDUSTRIES

URL: https://twitter.com/TOPY_INDUSTRIES

TOPY

Report

2023

TOPY Report 2023

TOPY

Report

2023

With an eye on the future society of 2050, the Group is committed to contributing to the realization of

a carbon-neutral society and addressing societal challenges in an era of major transformation.

Under the Group's fundamental philosophy to"fulll its responsibilities as a public institution and contribute to the realization of a sustainable recycling -oriented society through the continuation and development of its business,"we are advancing sustainability activities. As the movement toward carbon neutrality by 2050 gets into full swing, the Group will further promote efforts to address various ESG issues, including climate change, in order to continue to be a company trusted by society for many years to come.

TOPY Sustainable Green Vision 2050

• Aiming to realize an afuent society where people can live safely and healthily, we will continue to
  grow sustainably beyond the times -

2050

Achieve carbon neutrality

2030

Reduce CO2 emissions by 46% (compared to FY2013)

Promote green business

2040

Reduce environmental impact

A global corporation in harmony with people and the environment

An afuent

society where

people can

live safely and

healthily

TOPY Active & Challenge 2025

					ersity
				d div
			n an
		onizatio
	ecarb
ue d
Purs

Reduce CO2 emissions by 46%

Contribute to achieving the SDGs

"A company that creates new value and leads in solving social issues"

of customers

Accelerate contributions to

realization of low-carbon society

Strengthen resilience

A solid management

foundation for

sustainable growth

Financial strategy

Business

strategy

Sustainability

strategy

01 TOPY Report 2023

Medium- to long-term innovation

through the promotion of DX

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The green concept

In this vision,"going green"is not limited to reducing environmental impact, also includes the broader concept of activities that aim to contribute to the optimization of all ESG issues that should be addressed by the Group.

TOPY Report 2023

02

Group Basic

Philosophy

Contents

The Topy Industries Group will fulfill its responsibilities as a public institution and contribute to the realization of a sustainable recycling-oriented society through the continuation and development

of its business.

Group Code of

Conduct

－To win the trust and respect of society －
Under the Group Basic Philosophy, the
management and employees of the Topy
Industries Group shall strictly abide by
all applicable laws and ordinances, the
spirit reflected, and the Corporate Code of
	Basic Sustainability
Conduct, while accepting full corporate social
responsibility and fostering an open-minded		Policy
and creative corporate culture.	The Topy Industries Group will promote

Contents and Editorial Policy

Chapter 1 Value Creation

Businesses of the Topy Industries Group

History of the Topy Industries Group

Value Creation Process of

the Topy Industries Group

Business Model and Strengths of the Topy Industries Group

Pursuit of High Added Value through Proprietary Technologies

Non-Financial Capital to Support Value Creation

Special Feature

Human Resources Strategies

Chapter 2 Growth Strategies

Top Message

Medium-Term Management Plan

Special Feature DX Strategies

Message from the Ofcer in Charge of Finance

04	Chapter 3 Business		S	Social Responsibility
	Steel Segment	29		Relationship with Customers
	Automotive and Industrial Machinery			and Business Partners	49
05			Contribute to Society through
Components Segment
07	(Wheels for Passenger Vehicles)	31		Business	51
Automotive and Industrial Machinery			Contribution to
09	Components Segment (Commercial			Local Communities	52
and Off the Road Wheels)	33		Respect for Human Rights	53
	Automotive and Industrial Machinery
11			Strengthening Human Capital	54
Components Segment (Undercarriage
	Parts for Construction Machinery)	35	G	Corporate Governance
13	Business Development Segment	37
		Management Team	61
	Chapter 4 Sustainability
15			Corporate Governance	63
Stakeholder Engagement	38
17	Identication of Materiality	39	Chapter 5 Corporate Data
	Promotion System for
		Our History	69
	Sustainability Management	40
19			Consolidated Financial
23	E Environmental Initiatives		Performance for the Past
	11 Years	71
25	Environmental Management	41	Non-Financial Highlights	73
27	Response to Climate Change	43	Major Subsidiaries & Afliates	75
Responding to Environmental		IR Information	76
	Risks and Contributing to the
	Establishment of a Recycling-
	Oriented Society	45
	Reducing Environmental Impact
	through Products and Services	47

management based on the Group Basic

Philosophy and aim to enhance sustainable

corporate value and contribute to the sustainable

development of society through the pursuit of

technological innovation and the resolution of

social issues.

Editorial Policy

Basic Policy

Topy Report 2023 provides selected important information focusing on the company 's management strategies to improve corporate value in the medium to long term, including information related to its business activities, operating results, social responsibilities, and management control system. The aim of this report is to encourage candid dialogue with our stakeholders, including shareholders, investors and related parties.

The IFRS's International Integrated Reporting Framework and the Ministry of Economy, Trade and Industry's Guidance for Collaborative Value Creation were used as references in the creation of this report.

Reporting Scope

This report covers all companies listed as subsidiaries of the Topy Industries Group (consolidated basis). However, some activities and data represent only Topy Indus- tries, Ltd. In principle, activities where the scope is not specied refer to those of the Topy Industries Group. Where it is necessary to specify the applicable scope, activities by Topy Industries alone are identied within the headline or descriptions as Topy Industries or the"Company,"and activities by an individual Group company are identied by its corporate name.

Reporting Period

Covers mainly FY2022 (April 1, 2022 to March 31, 2023), but also includes some activities that occurred on and after April 1, 2023.

Date of Issue

October 2023

Inquiries Regarding this Report

Topy Industries, Ltd.

(General Affairs Department)

Art Village Osaki Central Tower, 1-2-2

Osaki, Shinagawa-ku, Tokyo 141-8634,

Japan

TEL: [phone]

03

TOPY Report 2023

TOPY Report 2023

04

Chapter
1	Value Creation

Businesses of the Topy Industries Group

The Topy Industries Group is a comprehensive metal processing group with an integrated production procedure from raw material production to the fabrication of nished products. Within this, the steel segment engages in raw material supply and the automotive and industrial machinery components segment unit deals in material processing, both of which are interrelated. The Group is also striving to diversify its businesses, which now encompass the power generation segment, manufacture and sale of mica, research and development of robots, leasing of real estate, and operation of sports clubs.

						(JPY million)
				Net sales	Operating prot
				334,496	7,175
			Automotive and Industrial Machinery	198,147	4,016
Sales			Components Segment	59.24%

Steel Segment

A raw material business operated since our foundation

At the Topy Industries Group (the"Group"), the steel business unit produces steel using electric furnaces as well as a wide variety of steel bars. Wide ange beams, general section steels and deformed bars are shipped as construction materials chiey to customers in both domestic and overseas markets, while deformed section steels are largely supplied to the company's automotive and industrial machinery components segment unit where they are turned into n- ished products. This business unit includes companies engaging in the collection and recycling of steel scrap, a transportation company, and a trading company that acts as the logistics and trading arms of the unit. In addition to inter-group business transactions, it also sells products and provides services to customers outside the Topy Industries Group.

Net sales	Operating profit (loss)			(JPY million)
15,000					107,971	125,000
12,000				88,915		100,000
80,442	73,404	75,657			75,000
9,000			8,038
6,000						50,000
3,000		4,142				25,000
2,248
		1,293
0			(625)		0
-3,000						-25,000
	2018	2019	2020	2021	2022	(FY)

Value Creation

Growth

by segment			Steel Segment	107,971	8,038
in FY2022			32.28%
			Power Generation Segment	21,957	(566)
			6.56%
			Other Segment	6,418	1,360
			1.92%

General	Deformed
section	section
steels	steels
Steels for use within the company	Steel construction materials	Steel materials for ships and
		industrial machinery

Strategies

Business

Automotive and Industrial Machinery Components Segment

Power Generation Segment

Other Segment

A world-leading comprehensive manufacturer of wheels and undercarriage parts for construction machinery

We manufacture and sell products including steel and aluminum wheels for automobiles, wheels for mining vehicles, undercarriage parts for construction machinery (track shoes*1 and tracks*2 ), and industrial steel fasteners for automobiles such as precision leaf springs.

*1 Track shoes: Component of tracks manufactured by processing and heat-treating hot rolled steel materials (special steel).

Track shoes and other components are assembled to form tracks.

*2 Tracks: A general name for the assembled undercarriage components of construction machinery vehicles, which are generally called a steel track belt.

Net sales	Operating profit (loss)			(JPY million)
10,000	188,175				198,147
174,015				200,000
				166,542
8,000		7,833				160,000
		136,113
6,000							120,000
4,000					4,813	4,016	80,000
2,000			1,657				40,000
0				(221)			0
-2,000							-40,000
		2018	2019	2020	2021	2022 (FY)

Focusing on the stable supply of electricity while paying utmost consideration to maintaining harmony with the surrounding environment

Net sales	Operating profit (loss)		21,957	(JPY million)
4,000						20,000
3,000						15,000
2,000	10,567	9,326			10,000
		7,583
1,000				9,718		5,000
0				(1,957)	(566)	0
-1,000		1,228	852	165		-5,000

Creating new sources of prot

Net sales	Operating profit (loss)			(JPY million)
2,500	7,041	6,558		6,418	7,500
		6,001
2,000		5,767		6,000
1,500	1,550			1,360	4,500
1,000		893	1,023		3,000
500					1,500
0		(185)			0

Sustainability

Wheels	Undercarriage parts for	Industrial fasteners
	construction machinery	(precision leaf springs, etc.)
	(track shoes, tracks)

Wheels for	Wheels for commercial vehicles	Ultra-Large Wheels for
passenger vehicles		Mining Equipment [SGOR®]

Track shoes

Aluminum

Steel

Industrial fasteners

Tracks

Steel

-2,000				-10,000
2018	2019	2020	2021	2022 (FY)

We took electricity deregulation as an opportunity to construct a coal thermal power plant (Toyohashi-shi, Aichi) while paying utmost consideration to maintaining harmony with the surrounding environment, and began to operate our electricity wholesale business in 2000. In December 2022, the plant began generating power using biomass solid fuel produced from food waste and sewage sludge in Toyohashi- shi, contributing to local production for local consumption of energy.

Power plant

Biomass solid fuel

-500				-1,500
2018	2019	2020	2021	2022 (FY)

In the Business Development Area, we are expanding sales of mica (ar- ticial mica), which is used for cosmetics and other products, in Japan and other countries, while conducting research and development for crawler robots utilizing our suspension technology. We also lease real estate, such as TOPYREC PLAZA (https://topyrecplaza.com/) (Mina- mi-suna,Koto-ku, Tokyo), and operate sports clubs, including OSSO.

Mica for cosmetics

Robots

Corporate Data

05

TOPY Report 2023

TOPY Report 2023

06

Chapter 1

Value Creation

History of the Topy Industries Group

Three strengths developed over our 100-year history

In 1964, our integrated production system for producing and making full use of steel was completed through the merger of four companies (engaging in businesses concerning steel and wheels, undercarriage parts for construction machinery, and others). The integration of different businesses has led to the global development of the automotive and industrial machinery parts segment and the creation of new businesses (industrial fasteners, power generation, mica, and other businesses), creating management stability and contributing to earnings growth.

Steel	Wheels	Undercarriage parts	Power generation	Business development
for construction machinery

(JPY billion)						(JPY billion)
350							35
300		Net sales	Operating profit				30
250							25
200							20
150							15
100							10
50							5
0							0
(FY)	1964	1970	1980	1990	2000	2010	2020
							-5

*FY1964 to FY1976: Non-consolidated FY1977 to FY2022: Consolidated

Value Creation

(Year)

Founded in 1921
Origin of deformed section steel technologies

Establishment of an integrated production system

2000

2020

Growth

Japan

1921

Foundation of Miya

Steelworks (predecessor of

Toto Steel Mfg., Co., Ltd.)

	1922			1953
	● Miya Steelworks succeeds		Hot-rolling and
	in hot-rolling steel sash bars		the commercial
	(window frames)		production of
					track shoes starts

1930

• Teikoku Hatsujo Seisakusho (the predecessor of Japan Motor Wheel Co., Ltd.) commences the production of prototype steel wheels for automobiles

1964

Topy Industries, Ltd.

is established

Through the merger of Japan Motor Wheel Co., Ltd., Toto Steel Mfg., Co., Ltd., Toto Zoki Co., Ltd., and Toto Tekko Co., Ltd.

2008

Strengthening of the business alliance with Nippon Steel Corporation

2009

The production capacity of the rolling mill shop for medium-size steel products (a rolling line for deformed section steel) is increased at the Toyohashi Plant

	2014				2021		Strength 1
	A new steelmaking plant is completed at			100th anniversary
	the Toyohashi Plant with the introduction
	of an environmentally friendly, high-					Integrated
	efciency electric furnace
							Production
							System

Strategies

Business

Overseas

A building in the early Showa Period (1926 to 1989) with steel sash bars

Steel wheels for passenger vehicles

1985

Expansion into the United States

2003	2013	2016
Expansion	Expansion into	The business and capital
into China	Mexico	alliance with MW Italia
		S.R.L. is strengthened
	Aluminum wheels for
	passenger vehicles

Wheels for		2013
	Expansion into
commercial vehicles
	Indonesia

2017

Expansion into

India

2018

Expansion into China and Thailand (Asahi Tec Corporation becomes a wholly owned subsidiary)

Strength 2

Global

Expansion of

the Processing

Division

Sustainability

Wheels manufactured by Teikoku	Undercarriage parts for
Hatsujo Seisakusho
construction machinery

1999 Expansion into the United States

2002	2013
Expansion	Expansion into
into China	Indonesia

Technologies and new businesses

1974

1982

Commencement of the

Development of SGOR®,

industrial fastener business

the world's largest wheel for

mining vehicles

Developed from metal

processing technologies

1987

Practical application

of high-quality mica

for cosmetics

Developed from electric

furnace melting technologies

1989

Heat treatment efciency improved through the development of low- carbon boron steel for track shoes

2000

The power generation business is launched

Use of existing infrastructure of the steel business for the power generation business (including land, quays and power transmission facilities)

2009			2018
Development of lighter weight wheels			Launched TACoil®, Japan's
• Adoption of rims made of deformed section			rst compact coil made of steel
	steel and discs formed through cold spinning			bars wound at high density for
	(rocking die forming) (for commercial vehicles)			reinforced concrete
• Adoption of high-tensile-strength steel sheet
	(for passenger vehicles)

2021

Launched Evolution Type SGOR® wheels for mining vehicles

Strength 3

Value Creation

through

Proprietary

Corporate Data

Environmentally friendly			of the steel business

1992	2001
Established Global	Developed chrome-
Environment Ofce	free pretreatment
	technology for
	aluminum wheels

2010		2018		2020
Started mass production of ISO	Received Energy	Toyohashi Plant received gold
method wheels combined with ECOD-	Conservation Center	rating in the CSR company
processed discs, achieving a weight	Chairman's Award at the	evaluation by EcoVadis of
reduction of approximately 15%.	Energy Conservation Grand	France
		Prize 2017

2020	Technologies
Introduced water-soluble
coating for crawler tracks
to reduce VOC emissions

1971

Established Topy Industries

Central Environmental Facilities

Committee

07 TOPY Report 2023

1998 to 1999

ISO 14001 certication

obtained at four Topy

Industries plants

2004	2013	2020	2022
「Topy Industries Environmental Philosophy	Started EneKatsu 2020	Acquired right to use EcoLeaf	Formulated long-term
Formulated Topy Industries Basic		Environmental Label for six	vision for sustainability
Environmental Policy		products
			TOPY Report 2023	08

Chapter 1

Value Creation

Value Creation Process of the Topy Industries Group

Creating social value and achieving sustainable growth based on advanced technological capabilities and

an integrated production system for producing and making full use of steel

The Group has paved the way for global expansion by providing products and services that meet the needs of customers and society based on its advanced technological capabilities and integrated production system for producing and making full use of steel and continued to grow by applying its core technologies to expand business into peripheral elds. Going forward, we will continue to achieve sustainable growth by maximizing the strengths and management resources we have developed over the years, while working to solve social issues and create social value.

Value

Medium-Term Management Plan

2022 to 2025

TOPY Active & Challenge 2025

TOPY Sustainable Green Vision 2050

Creation

INPUT

Manufacturing P. 15 capital

Production bases in Japan and overseas and highly

Group Basic Philosophy

Basic Sustainability Policy

		Business model
		Steel
Strength		Electric furnace		• Steel construction materials
		steelmaking technologies			• Steel materials for ships and
					industrial machinery
		Technologies for rolling
		deformed section steel
		Steel for use within
		the company

OUTCOME

Recycling of scrap iron, etc. using electric furnaces

Enhancement of the functionality of steel materials for various purposes

Improvements in the safety and functionality of wheels and undercarriage parts for construction machinery

Group Basic Strategy

	Promote segment			Strengthen domestic
	management			business base
Strengthen overseas			Contribute to
	protability			decarbonization
	Three key strategies
		Business
		strategy
		Five key
		themes
	Financial			Sustainability
	strategy			strategy
				Non-nancial
	Financial
	goals			goals
	Materiality

An afuent society

where people can live

safely and healthily

A global corporation	A solid
in harmony with	management

Growth Strategies

Business

efcient manufacturing

facilities and lines

Intellectual	P. 15
capital

Proprietary technologies and know-how, and R&D for future growth

Human capital P. 16

Strength 1

Integrated

Production

System

Strength 2

	Automobiles and		• Wheels for passenger vehicles
industrial machinery		(steel, aluminum)
					Steel wheels for commercial
	Metal processing
			vehicles
		technologies
				Ultra-large wheels for mining
	Heat treatment
			equipment
		technologies
				• Undercarriage parts for
	Coating technologies			construction machinery
					(track shoes, tracks)
		Procurement	Stable supply chain within and
		outside the Group

Provision of a stable energy supply

Improvements in the safety and functionality of cosmetics using impurity-free synthetic mica as a raw material

Reductions in manpower and energy needs using robots

	Promotion
	of green
	innovation
Environment
E	Contribution
	to building
	a recycling-
	oriented

people and the	foundation for
environment	sustainable growth

Sustainability

Diverse human resources

capable of supporting

sustainable growth

Social capital P. 16

Trust from customers, business partners, local communities, and other stakeholders

Natural capital P. 16

Global Expansion

of the Processing

Division

Strength 3

Value Creation

through

Proprietary

Recycling

Development and design

Production

Supply and sales

Product development and design capabilities that leverage the technological strengths and synergies of each process

Ability to produce products efciently and stably in an environmentally friendly manner

Ability to handle a wide variety of products in small lots and global supply system of the processing division

Economic Value

Financial capital targets

(medium-term plan)

Rate of operating prot

on sales

4.5% or higher EBITDA .... 32.0 billion yen

ROE ......... 8.0% or higher

	society
	Respect for
	human rights
Social	Support for
S	diverse human
resources
	Contribute to
	society through
	business

Corporate Data

Efcient use of various

resources

Financial capital

Technologies

Power generation		Electricity: Use of the existing infrastructure
	of the steel business
Business		Mica: Application of electric furnace melting
	technologies
development		Robots: Application of track manufacturing
		technologies

Governance	Build of a solid
G	management
foundation

Sound nancial footing

09 TOPY Report 2023

TOPY Report 2023

10

Chapter 1

Value Creation

Business Model and Strengths of the Topy Industries Group

Building a competitive value chain with the One-piece Cycle and supplying high value-added products globally

The Group hopes to create a new movement, using steel as a medium to create a cycle in unison with society through the technology and quality that we have developed over the years to make society more afuent and easier to live in. The One-piece Cycle embodies the thinking of the Group.

Strength 1

Integrated

Production

System

Strength 3

Value Creation

through

Proprietary

Technologies

Source of our product development and manufacturing capabilities

Our integrated production system from materials to n-	Strength 2
ished products is the source of our ability to develop
products that meet the needs of customers and society	Global
as well as our manufacturing capabilities that enable us to
Expansion of
consistently produce high-quality products. In addition, we
Processing
contribute to the realization of a recycling-oriented society	× the Division
by recycling steel scrap as the main raw material, while
at the same time reducing both environmental impact and
costs by utilizing environmentally friendly production facili-
ties and energy-saving technologies.

18 production bases in

7 countries overseas

With production bases around the world, we have established a global supply system capable of meeting the local procurement needs of global automobile and construction equipment manufacturers.

Product lineup with high market share at the top level in Japan and overseas

Value Creation

Materials division	Steel segment					Processing	Automotive and industrial machinery	Products
		Materials		Products
			division	components segment

Procurement	Stable supply chain within
Development	Product development and design capabilities that
and design
Production	Ability to produce products efciently and stably
Supply and sales	Ability to handle a wide variety of products in small lots

and outside the Group	Customers	Society
leverage the technological strengths and synergies of each process
			Compensation/
in an environmentally friendly manner	cash
			Shareholder returns
and global supply system of the processing division			Growth
			investment

Growth Strategies

Business

External suppliers

Recycling of steel scrap as a raw material

18 production bases in 7 countries overseas*

* Excluding locations in Japan, MW Italia S.p.A., Incoasc, Paco Aquina

China

Topy Undercarriage (China) Co., Ltd.

Europe

Fujian Topy Autoparts Co., Ltd.

(France, Poland, Romania, Russia, and Turkey)

(MW Italia S.p.A.)

Ring-Techs Guangzhou Co., Ltd.

Guangzhou Wheelhorse Asahi Aluminium Co., Ltd.

Guangdong Dicastal Auto Parts Co., Ltd.

Japan

India

Topy Industries, Ltd.

WIL Car Wheels

Ring Techs Co., Ltd.

Kyushu Wheel Kogyo, Ltd.

Topy Fasteners, Ltd.

United States

Topy America, Inc. Topy Precision Mfg., Inc.

Sustainability

Corporate Data

Capacity expansion of the Akemi Recycling Center

		Approximately		Approximately
Processing capacity		4,000 tons		10,000 tons
		per month		in 2025
CO2 emissions from electric		Reduction of approximately 17,000 t/year
furnaces due to recycling

of dust

South Africa

(MW Italia S.R.L.)

Thailand

Topy Fasteners (Thailand) Ltd.

Asahi Tec Aluminium

(Thailand) Co., Ltd.

Vietnam

Topy Fastener Vietnam Co., Ltd.

Indonesia

PT. Topy Palingda Manufacturing Indonesia

PT. Topy Undercarriage Indonesia

(PT. Inkoasku, PT. Pakoakuina)

Mexico

Topy MW Manufacturing Mexico S.A. de C.V. Topy Fasteners Mexico, S.A. de C.V.

Products produced at each base

Wheels for passenger

Wheels for passenger

Wheels for commercial

Wheels for mining

Undercarriage parts

Industrial

Alliance

vehicles (steel)

vehicles (aluminum)

vehicles

equipment

for construction

fasteners

partner

machinery

11

Raw materials

Ferrous scrap

12

TOPY Report 2023

TOPY Report 2023

Chapter 1

Value Creation

Pursuit of High Added Value through Proprietary Technologies

Proprietary technologies to meet diverse internal and external needs

Over the years, the Group has nurtured diverse and original technologies under the keyword of making steel and handling steel. We will continue to focus on developing and strengthening technologies that will contribute to solving issues faced by our customers and society and become a source of competitiveness for the Group.

Electric furnace steelmaking technologies

High-efciency electric furnace that achieves the world's top-level low electrode basic unit

The Toyohashi Plant Steelmaking Factory began operations in March 2015, with the upgrading of aging equipment and a supply system resistant to disasters such as the anticipated Nankai Trough earthquake. We introduced one of Japan's largest 200-toneco-friendlyhigh-efciency electric furnace (ECOARC™*) and made subsequent changes in operation methods, such as in-furnace atmosphere control to suit the characteristics of the ECOARC™ furnace. By improving operations using our unique technology and know-how, we have achieved energy conservation and cost reduction, leading to further decreases in per-unit electrode consumption. The steelmaking factory is now one of the most environmentally friendly and competitive in Japan, operating only on inexpensive nighttime electricity due to increased steelmaking capacity, and becoming self-sufcient in billets for steel bars by introducing a continuous casting machine for both blooms and billets.

*ECOARC™ is a registered trademark of Steel Plantech Co.

Metal processing technologies

Achieved weight reduction and high strength and quality, and gained about 90% of the Japanese market share

The company boasts world-class productivity, capable of manufacturing commercial	Value
wheels as fast as one every nine seconds. Rim materials for commercial vehicle wheels
are made from our electric furnace materials, which are effective in achieving carbon neu-
trality. Through our technologies for rolling deformed section steel, we have reduced the	Creation
weight of the rim material by making it as thin as possible while maintaining its strength,
which greatly contributes to improved fuel efciency. In addition, discs manufactured
through our unique ECOD molding process can signicantly reduce waste materials
compared to general manufacturing methods, contributing to resource conservation.
Steel wheels for commercial vehicles		Growth
Our steel wheels for trucks and buses are made of deformed section steel, which
we have independently developed based on our advanced analysis technology and
accumulated know-how, to reduce weight and achieve high strength and quality.
We have captured approximately 90% of the domestic market share of steel wheels		Strategies
sold to automobile manufacturers.

Heat treatment technologies

Achieving high durability of undercarriage parts for construction machinery	Business

Energy saving and cost reduction effects

By using the heat energy from the exhaust gas, which used to be discarded, to preheat steel scrap and continuously feed it into the electric furnace, we have been able to signicantly reduce the amount of electricity used. In addition, continuous melting by at bath operation, in which scrap is continuously fed from the preheating shaft into the hot water pool of the electric furnace, has resulted in improved productivity and sig- nicant cost reduction due to the reduction of inactive time and heat extraction.

Heat generation efciency improvement of 4.9% Total energy consumption reduced by 7.7%

			Maintain exhaust gas
			temperature
			Maximize the use of scrap
			preheating
			Secondary combustion of
Shaft		unburned gases such as CO is
output side
	used to achieve these goals.
exhaust gas
temperature
must be above
a certain level.

20% reduction in steelmaking costs compared to conventional equipment Lowest cost level in Japan

Our strength lies in our technology that increases
strength, wear resistance and toughness based
on a proprietary heat conduction analysis system
through repeated heating and cooling. In addition,
by developing the world's fastest link processing
line and an automatic link belt assembly line that
no other company can match, we supply stable
quality and low-cost crawler belts to the world.	Sustainability
Tracking shoes, the material used in tracks, are one of our
core products. They are manufactured in an integrated man-
ner in-house, from material selection to completion, in close
cooperation with the Steel Division, which handles steelmak-
ing and rolling.

Technologies for rolling deformed section steel

Manufacturing various complex cross-section steel to meet the needs of customers

One of our strengths is our deformed section steel manufacturing technology that makes full use of our unique numerical analysis. Although deformed section steel products with asymmetrical cross sections are prone to bending during the rolling process, we are able to correct the bending by having our production lines convey the special shapes.

Mast materials for forklift trucks

This steel shape is used for the vertical section (mast) at the front of a forklift. It is a product that requires high strength as well as wear resistance and weldability.

13 TOPY Report 2023

Coating technologies		DataCorporate
Responding to the diversifying needs of customers and society
				Leveraging our coating technology that enables metallic par-
				ticles to be uniformly and precisely oriented, we have de-
				veloped satin, bronze, and high-glossglitter-colored wheels
				for high-grade vehicles, in addition to conventional plated
				wheels, which stand out for their premium appearance, in or-
				der to differentiate ourselves from our competitors and meet
				diversifying needs. We are also actively promoting environ-
				mental friendliness by using low-temperature baking paints
				and improving coating efciency.

TOPY Report 2023

14

Chapter 1

Value Creation

Non-Financial Capital to Support Value Creation

Strengthening non-financial capital for further value creation

Manufacturing capital	Intellectual capital

Production bases in Japan and	Proprietary technologies and know-
overseas and highly efcient
how, and R&D for future growth
manufacturing facilities and lines

Non-nancial capital, including technological capabilities that have been continuously rened over the 100 years since our founding and human resources that are the source of value creation, are important management resources that support the sustainable growth of the Group.

We are working to strengthen our non-nancial capital for further evolution of value creation.

				Value Creation
Human capital	Social capital	Natural capital
				Growth
Diverse human resources capable of	Trust from customers, business			Strategies
partners, local communities, and	Efcient use of various resources
supporting sustainable growth
other stakeholders

Concept of capital

The Group has a wide range of production bases in Japan and overseas, manufacturing product in optimal locations according to product characteristics and customer needs. We promote the supply and cross-sourcing of materials and the sharing of development and manufacturing roles among our production bases to build an efcient global production system and support the integrated production system from materials to products and the resource-recycling business model that is a characteristic of the Group.

In addition, at each of our production bases, we are introducing highly efcient manufacturing equipment and constructing production lines to create products that are competitive in terms of both cost and environmental friendliness.

Throughout its more than 100-year history, the Group has always been a pioneer, repeatedly taking on new challenges with originality and ingenuity, and creating diverse and creative technologies. Recently, customers have requested a wide range of products in terms of weight reduction, shape and size, and environmental friendliness, and the Group's strength lies in its ability to respond to such requests, backed by the proprietary technologies and know-how it has developed over the years.

Furthermore, by applying these technologies and know-how, we have created new technologies, leading to the expansion of our business.

We believe that our human capital is our greatest asset and that reinforcing it is the source of our value creation.

In order to respond to rapidly changing society and technology and open the way to the future, we need human resources who can always think and act on their own initiative. We also believe that the ability to create new value comes from diverse human resources who recognize each other's differences in values, enhance organizational capabilities, and take on the challenge of achieving major goals.

The Group is working to strengthen its human capital through human resources development and the creation of a workplace environment in which a diverse range of human resources can play an active role.

The Group has earned the trust of its customers by providing products and services that meet their needs. In addition, by building strong relationships of trust and cooperation with many of our business partners and alliance partners, we are able to provide a stable supply of products and services around the world.

Moreover, coexistence with the local communities in which we operate is essential to our business activities, and each of our production bases engages in activities that contribute to the local communities in which it is located.

The business activities of the Group are closely related to natural capital, including the use of water resources and mineral resources as raw materials for products and fuel for power generation.

Through its resource-recycling business model, the Group contributes to the realization of a sustainable, recycling-oriented society by effectively utilizing limited resources through recycling. We also view promotion of green innovation as a materiality and promote efcient use of natural capital and environmental impact reduction through development and advancement of environmental technologies to conserve the global environment and biodiversity as well as to create economic value.

Business

Strengths of

capital/current status

• Optimal global production system	• Electric furnace steelmaking technologies
(Japan and 18 production bases in 7	• Technologies for rolling deformed section
countries overseas)	steel
• ECOARC™, an environmentally friendly	• Metal processing technologies
high-efciency electric furnace	• Heat treatment technologies
• Crude steel production capacity of approx.	• Coating technologies
1 million tons/year	• Business development strategy center
• Advanced metal sorting equipment at the	• R&D expenditures 1.0 billion yen (FY2022)
Akemi Recycling Center
• Manufacturing facilities and lines based on
proprietary technologies
• Capital investment 8.9 billion yen (FY2022)

	• Promotion of green innovation
Related materiality	• Contribution to building a recycling-	• Promotion of green innovation
oriented society
	• Contribute to society through business
	• Global production bases	P. 12	• Proprietary technologies	P. 13
	• Proprietary technologies	P. 13	• Development of environmentally	P. 47
Initiatives for	• Responding to environmental risks		friendly products
and contributing to the establishment	P. 45	• Technical education (development	P. 54
strengthening capital	of recycling-oriented societies	of education system)
• Quality	P. 49	• Intellectual property policy	P. 68

15 TOPY Report 2023

• Number of consolidated employees:		• High market share based on customer trust	• CO2 emissions		Sustainability
approx. 5,700		· Steel wheels for passenger vehicles:	(consolidated, Japan, FY2022)
• Ratio of employees at overseas production	approx. 55% in Japan		Scope 1 233 thousand tons CO2
bases: 43% (FY2022)		· Steel wheels for commercial vehicles:	Scope 2 332 thousand tons CO2
• Human resources development based on	approx. 93% in Japan		Scope 3 1,334 thousand tons CO2
an education system		· Ultra-large wheels for mining equipment:	• Environmental management system ISO
• Promotion of environmental improvement	approx. 90% in Japan and overseas	14001 certication ratio (consolidated and
and other measures to promote diversity	· Track shoes for hydraulic excavators:	production sites): 75% (FY2022)
• Efforts to improve ES (employee satisfaction)	approx. 71% in Japan		• Monthly processing capacity of the Akemi
• Promotion of Health Management®*		*All of the above are actual sales shares for au-	Recycling Center: approx. 4,000 t		Corporate
		tomobile manufacturers and construction equip-
		ment manufacturers in FY2022 (based on re-
		search by Topy)
• Respect for human rights		• Respect for human rights		• Promotion of green innovation		Data
		• Contribution to building a recycling-
• Support for diverse human resources	• Contribute to society through business
oriented society
• Human resources strategy	P. 17	• Quality	P. 49	• Resource-recycling value chain	P. 11
• Human resources development	P. 54	• Supply chain management	P. 50	• Environmental management	P. 41
• Diversity	P. 55	• Ensuring fair trade	P. 50	• Response to climate change	P. 43
• Improvement of employee satisfaction	P. 57	• Contribution to communities	P. 51	• Biodiversity preservation and	P. 45
• Health and safety	P. 59	• Respect for human rights	P. 53	chemical management
		• Dialogue with shareholders		• Waste reduction and recycling	P. 46
		and investors	P. 68

*Health Management® is a registered trademark of the Institute for Health Management, a non-prot organization.

TOPY Report 2023

16

Chapter 1

Value Creation

Special Feature Human Resources Strategies

The Group aims to achieve sustainable growth by making appropriate investments in human resources in order to maximize their potential. The basic concept of the Human Resources Development Policy is to"create human resources who continue to develop through their work,"and we encourage employees to feel a sense of growth through working for the Group, thereby fostering a desire to

		Creation of organizational results
Output	To clearly manifest results, we are strengthening initiatives that celebrate	■ Promotion of job crafting
■ Evaluation system based on human resources
- Manifest results -	results through presentations and awards.	development
	■ Expansion of opportunities for improvement
		suggestions and project proposals

contribute to their peers and to the organization. Since 2015, we have been continuously working to improve our corporate culture through activities to enhance job satisfaction, creating an environment in which employees can proactively engage in their work. We will continue to engage in improvement activities so that employees can continue to work with peace of mind in a lively atmosphere.

Takanori Yoshikawa

General Manager,

Human Resources Department

Topy Industries Group Human Resources Development Policy

• Create human resources who continue to	• Continue to produce future business leaders
develop	• Create an organizational environment that
• Strengthen employees'capability to respond	permits diverse human resources to work
to environmental changes	actively in various ways

• Support employees in their autonomous career development

Develop

- Nurture -

Reward

- Compensate -

We provide opportunities for reskilling and various exchanges with the	Fostering a mindset for development
■ Expansion of managerial staff education
aim of fostering a proactive spirit of improvement.	■ Support for relearning (reskilling)
	■ Introduction of training to promote innovation

We are conducting a fundamental review of our human resources sys-	Implementation of evaluations and pay raises
in a balanced manner
tems based on the concept that results are dened as problem-solving	■ Review of personnel treatment system (personnel
ability combined with the ability to take action that leads to results.	evaluation, grading system, promotion system, etc.)
	■ Expansion of various awards

Value Creation

Growth Strategies

Strategies and initiatives for FY2025

• Providing opportunities for self-awareness realizations: 1-on-1meetings, thorough implementation and revision of the evaluation system, expansion of 360-degreesurveys, etc.
• Quality improvement of awareness based on realizations: cross-in-dustry exchanges, culture improvement workshops, training to en- hance DX literacy, etc.
• Quality improvement of actions based on consciousness change: cross-industryexchange training, idea proposal systems, etc.

Vision for 2030

• Quality improvement of corporate culture through the human re- source strategy implementation process
• Enhancement of human capital leading to human resource growth and higher protability
• Securing diverse human resources in consideration of sustainabil- ity management
• Human resources development in response to innovations in DX technologies such as AI and automation

				Business
	We aim to be a company where people want to continue to work, through	Enhancement of recruiting strength and
Attract	measures that are carefully tailored to each employee with diverse val-	diversication of work styles
■ Promotion of D&I recruitment and diversication of
ues. We have established a system to support employees with various
backgrounds who have challenges or difculties in working, and we are	recruiting methods
- Draw in -	■ Promotion of remote working (promotion of telework)
	improving the working environment for them. We will continue to support	■ Introduction of hourly annual leave
	diverse working styles while listening to the voices of our employees.	■ Introduction of a retirement age of 65
		Turnover rate within	Ratio of
		three years of hire

Human resource strategy in the Medium-Term Management Plan and four activity axes

Enhancement of recruiting strength and diversication of work styles

• Promotion of D&I*1 recruitment and diversication of recruiting methods
• Promotion of remote working (promotion of telework)
• Introduction of hourly leave system
• Introduction of a retirement age of 65

		Medium-Term Management Plan
Attract			human resources strategy
- Draw in -			Working style
			reforms
			Realization of operational
			reform through promotion
			of DX

Output			Creation of organizational results
- Manifest results -
			■ Promotion of job crafting*2
	Four axes of activity	■ Evaluation system based on human
	and correlated		resources development
		measures		■ Expansion of opportunities for
				improvement suggestions and project
Utilization of			proposals
human resources
Improving the working
environment and securing
diverse human resources
Strengthening					Develop
human capital
Human resources		- Nurture -
Demonstrate initiative through
	development
motivation and achievement		Expansion of
(engagement)	育成施策の拡充
development measures

[Targets to be achieved by FY2030]

Ratio of female managers:

10% or more

		for new graduates	mid-career hires	Sustainability
		(FY2022)
		(FY2022)
		25.4%
		5.2%
Progress towards the achievement goals set for FY2030
We are making steady progress towards the goals for securing and developing human resources set for FY2030. In terms of se-	Corporate
curing human resources, we have achieved our recruitment target of at least 40% for female employees in career-track positions,
thanks to the success of measures such as internships. We have also met our plans for both men and women regarding the rate
of acquiring childcare leave, which is one of our initiatives for promoting diversity. The ratio of female managers reached 6.3% in
FY2022 (up 1.3% from the previous year), and is on track to reach the target of 10% or more in FY2030.		Data
	Percentage of female new graduates hired for	Percentage of employees acquiring
Ratio of female managers	childcare leave (Topy Industries, FY2022)
career-track positions (Topy Industries, FY2022)
Male employees: 27%
(FY2022)
53.8%
6.3

Implementation of evaluations and pay raises in		Fostering a mindset for development
a balanced manner		■ Expansion of managerial staff education
■ Review of personnel treatment system (personnel		■ Support for relearning (reskilling)
evaluation, grading system, promotion system, etc.)	Reward	■ Introduction of training to promote
■ Expansion of various awards	- Compensate -	innovation

*1 Diversity and inclusion

*2 Method for enhancing job satisfaction and fulllment by making creative adjustments to one's way of working

17 TOPY Report 2023

%	Plan period: April 1,	Female employees: 100%
(Target for FY2030:
2021 to March 31, 2026	Plan period: July 1, 2020 to March 31, 2025
at least 10%)
Target: at least 40%	Male employees: acquisition rate of at least 7%
		Female employees: acquisition rate of at least 75%

TOPY Report 2023

18