Rasa Corporation

Products handled in the Resources & Metal Materials and Chemical Products businesses carry price risk arising from market fluctuations. Although the Group seeks to mitigate this risk by optimizing inventory holding periods and negotiating annual sales volumes in advance, if short-term market fluctuations exceed expectations, business performance may be affected. Imported mineral products and chemical products in particular are susceptible to domestic and overseas supply-demand trends.

The Group bears foreign exchange risk on foreign-currency-denominated sales and purchases, and in principle mitigates short-term impacts by entering into forward exchange contracts each time a transaction contract is concluded. However, if exchange rate fluctuations exceed expectations, business performance may be affected. In situations where hedging through forward contracts does not function effectively, financial losses may occur.

The Industrial & Construction Machinery, Environmental Equipment, and Plant & Facility Construction businesses depend on capital investment trends among manufacturers and local governments, and a general deterioration in the economic environment leads to a decline in demand. Resources & Metal Materials supplies a wide range of applications, including refractories and electronic materials, domestically and overseas, while Chemical Products supplies materials to the automotive, building materials, and electrical/electronics sectors; changes in domestic and overseas economic trends therefore spread across overall performance.

The Group procures the majority of its Zircon Sand under an exclusive sales agency agreement in Japan with Iluka Resources of Australia, and there is a risk of supply disruption if that company's mining output is constrained or its business policy changes. Warman Pumps depend on an exclusive sales agency agreement with affiliated company Taiheiyo Kiko Co., Ltd., and changes in the relationship with that company would directly affect business performance. Both are mineral products and specialized equipment for which securing alternative sources of supply is difficult, and this high degree of dependence constitutes a vulnerability to business continuity.

Rising tensions from the U.S.-China conflict, the situation in Russia and Ukraine, and tensions in the Middle East, among other factors, are increasing the risk of surging energy and raw material prices and disruptions to logistics and supply chains. The Group imports and exports mineral products centered on Zircon Sand and imports environmental equipment machinery, and procurement costs may rise due to international shifts in supply and demand. If geopolitical risks or supplier accidents make it impossible for the Group to fulfill its product supply obligations, this could have a material impact on business performance.

Both rising procurement and energy costs due to stricter environmental regulations such as the introduction of carbon taxes (transition risk) and damage to business sites or disruption of supply chains (physical risk) may affect business performance. The Group has formulated a Basic Sustainability Policy and deliberates countermeasures centered on its Sustainability Committee; it endorsed the TCFD in March 2023 and is working on assessing and disclosing the impact of climate change. However, depending on the pace of regulatory tightening or the frequency and scale of natural disasters, response costs may exceed expectations.

The Group holds confidential information including technical information, customer and sales information, and personal information of officers and employees, and business continuity could become difficult in the event of unauthorized external access, cyberattacks such as ransomware, or system failures caused by natural disasters or large-scale power outages. Although the Group has established information security management regulations and conducts training for officers and employees, this does not guarantee complete protection against increasingly sophisticated and diverse cyberattacks. Information leaks or business suspension would affect not only business performance but also the trust relationship with customers and business partners.

The Group is subject to numerous laws and regulations, including business licensing, environmental laws, trade-related laws, intellectual property laws, and labor laws, and future amendments, abolitions, or introductions of new regulations may affect business operating costs and procedures. The Group seeks to reduce this risk by establishing a compliance manual and implementing an annual compliance program, but if a situation arises in which laws or regulations are violated, this could lead not only to an impact on business performance but also to a loss of social trust.

The Group raises funds through borrowings from financial institutions, and sharp interest rate fluctuations or deterioration in the fund-raising environment may lead to increased financing costs or constraints on fund procurement. At present, the Group states that it faces no issues in fund procurement and does not recognize a likelihood of this risk materializing; however, in a rising interest rate environment, increased borrowing costs would raise the financial burden. The Group states that it will strive to mitigate this risk through optimal procurement in line with funding needs.

Under the medium-term management plan starting in FY2025, the Group has positioned M&A as one of its priority measures, establishing a joint "M&A Promotion Committee" between the Sales Division and the Administration Division to identify growth areas and synergy opportunities. However, if an acquired company fails to generate the profits expected at the time of valuation, or if contingent or unrecognized liabilities not identified at the time of the M&A subsequently materialize, this could adversely affect business performance and financial condition. As M&A activity becomes more active, goodwill impairment risk and rising integration costs also exist as potential risks.