NITTO BOSEKI CO., LTD.

The Company uses large quantities of LNG gas and electricity in the manufacture of glass fiber, glass wool, and other products, and thus bears the risk of energy price fluctuations. If electricity charges or crude oil prices fluctuate sharply due to geopolitical factors such as conflicts and disasters, or changes in energy policy, this could have a significant impact on business performance. The Company seeks to mitigate this risk through conversion to lower-cost energy sources and energy-saving measures.

As the Company conducts production activities in Japan, Taiwan, the U.S., and China and sells globally, it faces bidirectional risks: a decline in the competitiveness of overseas export products during yen appreciation, and a rise in the price of imported raw materials during yen depreciation. Significant exchange rate fluctuations could have a major impact on business performance and financial condition. The Company seeks to mitigate this risk through hedging measures such as forward exchange contracts.

If demand for customers' products slows due to global economic conditions, trade and tariff policies of various countries, geopolitical factors, or other causes, this could impact business performance. In particular, yarn and cloth for printed wiring boards and semiconductor package substrates in the Electronic Materials Business, and composite materials for automobiles and electronic devices in the Composite Materials Business, are subject to large market fluctuations, and demand for these can vary significantly. Since domestic sales in Japan also include a large proportion of products destined for overseas export, the Company's business structure is directly affected by global demand trends.

While the Electronic Materials Business maintains a competitive advantage as a world-leading company, there is a risk that this competitive advantage could decline due to intensifying competition with domestic and overseas competitors and the development of alternative materials to glass fiber. If the development of new technologies and new products is prolonged, this could lead to reduced growth potential and profitability, potentially having a significant impact on business performance and financial condition. The Company aims to maintain its competitive advantage through sustained investment in research and development.

While the Company diversifies risk by purchasing major raw materials from multiple suppliers, changes in the situation of business partners, changes in the economic environment, geopolitical factors such as conflicts and disasters, or global supply chain disruptions could cause raw material prices to fluctuate or make procurement difficult. In such cases, production activities could be affected, potentially having a significant impact on business performance.

As of the end of the current fiscal year, lawsuits seeking damages have been filed by construction workers and their bereaved families against the national government and dozens of companies that handled asbestos, including the Company, as defendants. A total of 35 cases are pending in the District Courts of Sendai, Mito, Saitama, Tokyo, Yokohama, Chiba, Nagoya, Osaka, Kyoto, Hiroshima, Takamatsu, and Fukuoka, the High Courts of Tokyo, Osaka, and Fukuoka, and the Supreme Court. If unfavorable rulings are made against the Company in these lawsuits, it could adversely affect business performance and other aspects of the Company.

The Company is working to achieve carbon neutrality by 2050 through setting CO2 emission reduction targets for fiscal year 2030, energy-saving activities, introduction of renewable energy, and TCFD information disclosure. However, the strengthening of climate change-related laws and regulations in Japan and overseas could affect production and sales activities. If opportunity losses arise due to a decline in social credibility, this could also impact business performance.

Since glass fiber products are positioned upstream in the supply chain, the impact of any product defects could extend widely. Regarding In Vitro Diagnostic Reagents, since raw materials of biological origin are used, maintaining stable quality is a challenge. Although the Company implements integrated quality control within the group, from antiserum production at its U.S. subsidiary through to final product manufacturing in Japan, if unforeseeable quality problems occur, this could adversely affect business performance and financial condition through decreased shipment volumes, damages claims, and reputational harm.

The Company has implemented systems resistant to cyberattacks and a company-wide management framework and periodic audits to protect personal and confidential information. However, if problems such as information leaks occur, and the response is inadequate or not sufficiently prompt, this could damage social credibility and reputation, thereby impacting business performance. As societal expectations regarding corporate social responsibility increase year by year, the importance of this risk is growing.

The Company has subsidiaries in Taiwan, the U.S., and China, and changes in political, economic, legal, tax, and social trends in each country, as well as factors such as conflicts, disasters, and the outbreak of infectious diseases, could adversely affect business performance and financial condition. For the Company Group, which has a global production and sales system, the increasing geopolitical risk is a significant risk that directly affects business continuity.