KURABO INDUSTRIES LTD.

Semiconductors, automobiles, housing, apparel, and real estate are key markets, and there is also a concentration of sales in specific countries/regions. Deterioration in economic conditions could result in reduced orders and lower sales. The company is working to develop new markets through R&D enhancement and new business creation under the medium-term management plan "Accelerate'27."

Competition in quality and price is intensifying in each business field, and a decline in competitive advantage could lead to a decrease in sales and profit. The company aims to enhance its competitive advantage and customer satisfaction by developing new products and services that contribute to a sustainable society using proprietary technology.

There are specific customers in each business field that have a large impact on earnings, and if such customers experience deteriorating performance, inventory adjustments, or production adjustments, sales may decline. The company is focused on strengthening relationships through the provision of high-quality, stable products and services, and on developing new customers to diversify risk.

There is a risk that stable procurement of certain parts and raw materials could become difficult due to market supply-demand conditions or logistics disruptions, and the risk of procurement difficulty is increasing due to the escalating situation in the Middle East. Supply shortages could result in insufficient production capacity, lost sales opportunities, and delivery delays to customers; the company addresses this by securing stockpiles, alternative raw materials, and alternative sourcing.

Raw materials such as cotton and petrochemical feedstocks, as well as fuel, are at risk of price surges due to market supply-demand conditions, international commodity market conditions, exchange rates, etc., and there is also a risk of a sharp rise in petrochemical feedstock prices due to the escalating situation in the Middle East. If price increases cannot be sufficiently passed on to product prices, profit may decline; the company addresses this by securing multiple supply sources and passing on price increases to sales prices in a timely manner.

Due to global business operations, significant fluctuations in exchange rates may affect net sales and costs, which the company addresses through hedging transactions such as forward exchange contracts. The company also holds marketable securities, and a significant decline in stock prices could result in valuation losses; the policy is to reduce cross-shareholdings to below 20% of consolidated net assets by the end of FY2027 (ending March 2027).

The Chemical Products business and Textiles business have operational bases in Brazil, Thailand, Indonesia, China, and other countries, which inherently carry risks such as unexpected changes in laws and regulations, changes in political and economic conditions, social unrest such as terrorism, war, or conflict, and inadequate infrastructure. The company responds according to the situation through information gathering and coordination with overseas affiliated subsidiaries, and has established systems to ensure safety and avoid losses in the event of an emergency.

If a major disaster such as a large-scale earthquake, typhoon, or fire occurs during production activities in Japan or overseas, it could disrupt production, damage facilities, and impede raw material procurement or product supply. Regarding the fire accident at a logistics facility involving the Chemical Products Division that occurred in June 2022, damage compensation lawsuits have been filed separately by SBS Flec Co., Ltd. and Sompo Japan Insurance Inc., and these are currently pending. The company hedges these risks through regular equipment inspections, disaster prevention drills, and insurance coverage.

The company holds confidential information, customer information, personal information, etc., and utilizes information systems for sales, production, and other operations. If unauthorized external intrusion, malware attacks, or internal errors cause information leakage, tampering, or prolonged system outages, this could lead to suspension of sales and production activities, damage compensation claims, and a decline in social credibility. The company addresses this through establishing an information security policy, appropriate installation and updating of security software, backup of important data, and regular training.

If human rights violations such as forced labor, child labor, harassment, or discriminatory acts occur in raw material procurement or product manufacturing/processing through supply chains around the world, this could affect procurement and production in addition to causing a decline in trust from customers and business partners. The company has formulated the "Kurabo Group Human Rights Policy" based on the UN Guiding Principles on Business and Human Rights, and addresses this through sustainable surveys of its supply chain.