ALCONIX CORPORATION

As the company globally distributes, manufactures, and sells non-ferrous metals such as aluminum, copper, titanium, and rare metals, sluggish demand or economic slowdown centered on Japan and the Asia region directly affects business performance. As countermeasures, the company is working to strengthen profitability through the expansion and development of focus businesses, efficiency improvements in stable businesses, transformation of low-profitability businesses, and strategic investment in new M&A and new businesses.

The prices of major traded materials such as aluminum and copper fluctuate in line with international markets such as the LME, and inventory without corresponding sales contracts bears price fluctuation risk directly. For materials listed on the LME, the company hedges in principle through commodity futures contracts, sets holding limits and loss-cut standards by internal organizational unit and material, and manages risk through inventory level optimization measures at the Market Risk Subcommittee.

Trade transactions with overseas companies and the business activities of overseas subsidiaries are conducted mainly in foreign currencies, and since the consolidated reporting currency is Japanese yen, exchange rate fluctuations affect business performance. In principle, transaction amounts are fixed through forward exchange contracts, and the company works to limit the impact on periodic performance through monitoring of hedging status and consideration of risk mitigation measures at the Market Risk Subcommittee.

Since much of the company's working capital and investments and loans to subsidiaries are funded through borrowings from financial institutions, a rise in interest rate levels may increase procurement costs and affect business performance. The company aims to reduce this risk through the review of transaction terms and reduction of working capital via appropriate inventory management, reduction of borrowings through a cash management system, and optimization of the fixed/floating interest rate ratio.

The company holds large receivable balances from numerous business partners both domestically and overseas, and deterioration or bankruptcy of a customer's business may make collection of trade receivables difficult, while bankruptcy of a supplier may halt the supply of goods, affecting business performance. The company works to mitigate this risk through the setting and annual review of credit limits, the use of trade credit insurance, deliberation on large credit exposures at the Credit Risk Subcommittee, and management of the portfolio by country.

Policy changes or sudden shifts in the political and economic environment in trading partner countries, countries receiving overseas investments and loans, or mineral resource producing countries may make it difficult to collect receivables and investment/loan funds or cause a halt in the supply of mineral resources. The company strives to reduce this risk by identifying high-risk countries based on ratings from external rating agencies, utilizing trade insurance, continuously selecting alternative suppliers, and managing the receivable portfolio by country and collecting and analyzing information at the Credit Risk Subcommittee.

As the company conducts a wide variety of business activities domestically and overseas, it faces the risk of violating a broad range of laws and regulations, including the Companies Act, tax law, the Antimonopoly Act, and export controls related to national security. The company manages this risk by strengthening the group-wide audit system, establishing an internal whistleblowing system, formulating and promoting awareness of a compliance handbook, and establishing an export transaction monitoring system operated by the Corporate Planning Department and Risk Management Department.

In addition to holding domestic and overseas consolidated subsidiaries and joint ventures, the company plans to promote investments and loans including M&A and capital expenditure, and if returns fall short of expectations and invested capital cannot be recovered, this may affect business performance and financial condition. The company manages this risk through support for group companies by the organization reorganized into the Business Promotion Department in April 2026, verification of the investment effects of new M&A and capital expenditure at the Investment and Loan Subcommittee, and periodic business viability assessments.

If unauthorized external access or virus infection causes leakage of information assets including personal information, or if unexpected system failures occur, this may seriously hinder business activities. The company implements measures including network infrastructure development and security measure promotion by the Information Systems Department, promotion of IT utilization and information management measures at the Information Management and Security Meeting, and measures against major incidents in cooperation with the Business Continuity Subcommittee.

While the company positions human capital as the source of value creation and has made strengthening human capital a top priority, difficulties in recruitment, outflow of personnel, or insufficient development of next-generation management personnel may delay the promotion of business strategy. The company is working to secure personnel and enhance their expertise through the development of an internal environment emphasizing 'ease of working,' 'sense of fulfillment at work,' and 'health for working,' as well as through improvements, expansion, and provision of compensation, education, and opportunities.