Chugai Ro Co., Ltd.

Demand for the Company's main products, production equipment, is directly affected by domestic and overseas economic conditions, particularly capital expenditure trends. The reciprocal tariffs imposed by the United States could significantly disrupt supply chains, and an economic downturn or reduced appetite for capital investment could affect operating results. As a countermeasure, the Company conducts order-taking activities while closely monitoring changes in economic and social conditions.

The ratio of overseas sales has trended at 16.7% in FY2024 (ended March 2024), 26.0% in FY2025 (ended March 2025), and 23.4% in FY2026 (ending March 2026), indicating a business structure that is susceptible to foreign exchange fluctuations. The Company raises the proportion of yen-denominated contracts, increases the ratio of local procurement, and hedges via forward foreign exchange contracts; however, there is no guarantee that these risks can be completely avoided, and this may affect operating results.

The Company recognizes that it is difficult to entirely eliminate the risk of nonconformity in the development, design, and manufacture of products based on customer specifications, both now and in the future. While product liability is hedged through insurance coverage, there may be cases where large claims for damages cannot be sufficiently covered. Loss of credibility or suspension of transactions due to quality issues may affect operating results.

The Company has established bases in China, Taiwan, Thailand, Indonesia, and Mexico, conducting import/export, local sales, and local production; however, there are risks of social and political disruption arising from unexpected changes in laws and regulations, fragility of industrial infrastructure, infectious diseases, and deteriorating security, terrorism, or war. The Company conducts order-taking activities while closely monitoring economic and social conditions in each country and investigating the status of business partners, but if such events materialize, business performance and financial condition may be affected.

In each country where the Company operates, it is subject to permits for business and investment, export restrictions related to national security, and legal regulations concerning trade, antitrust, environment, and recycling. If the Company fails to comply with these regulations, its activities may be restricted.

Since the majority of the Company's business consists of the design, manufacture, and construction of production equipment based on customer specifications, and there are cases where a long period elapses from estimation and order receipt to delivery, there is a risk that material and subcontracting construction costs may surge during that period due to changes in the supply-demand balance. The Company strives to reduce this risk through diversifying suppliers, placing material orders earlier, and building cooperative relationships with contractors, but this may affect operating results.

The Company holds listed shares of Japanese companies with market value as investment securities, and a decline in share prices may necessitate recording valuation losses. In addition, a decrease in valuation difference on available-for-sale securities may affect net assets.

Disasters such as earthquakes, tsunamis, floods, and fires, as well as the outbreak of infectious diseases, may cause human and material damage and affect business activities. The Company has implemented measures such as maintaining, inspecting, and training with disaster prevention equipment, formulating a BCP, and introducing a safety confirmation system, but there is no guarantee that any damages incurred will be sufficiently covered by insurance or other means.

The Company thoroughly conducts credit management of business partners through information gathering and pre-order screening in accordance with internal regulations, and takes out insurance as necessary; however, if a business partner falls into credit difficulty due to unforeseen circumstances, this may affect the Company's business performance.

There is a risk of system failures or leakage/loss of confidential information due to computer virus infection, unauthorized external access, cyberattacks, and the like. The Company strives to avoid such risks and minimize their impact through establishing information security management regulations, VPN connections for remote work, installing firewalls, and conducting regular response training and audits, but this may affect business performance.