Toabo Corporation

As of the end of December 2025, the balance of interest-bearing debt stood at ¥11,655 million, with the ratio to net assets remaining at a still-high level of 83.4%. While the Company aims to reduce this going forward, a significant change in current interest rate levels could affect its business performance and financial position. The ratio to net assets over the most recent five fiscal periods (FY2021 to FY2025) has shown an improving trend from 103.7% to 83.4%, but continued attention to interest rate risk remains necessary.

The Group conducts foreign-currency-denominated transactions both domestically and overseas, and significant fluctuations in exchange rates could affect its business performance and financial position. Although the Group hedges through forward exchange contracts, this does not eliminate the risk entirely. In addition, the results of consolidated subsidiaries and equity-method affiliates in China and Vietnam are translated into yen, and the Group is therefore also affected by exchange rate fluctuations at the time of translation.

Raw materials for the core apparel business and interior/industrial materials business are susceptible to international commodity market conditions such as crude oil and wool prices. Significant fluctuations in the supply volume or price of raw materials could affect business performance and financial position through increases in manufacturing costs. No specific countermeasures are described, leaving a structural vulnerability to market fluctuations.

The Group has production bases in China and Vietnam and conducts import/export transactions with overseas companies. Changes in laws and regulations or sudden shifts in political, economic, or social conditions in these countries and regions carry the risk of making receivables collection or business continuity difficult. Should such risks materialize, they could have a material impact on business performance and financial position.

Many of the Group's products compete with those of other companies, and intensifying competition leading to deterioration in the market environment could result in decreased sales volumes or lower selling prices. Such competitive pressure directly affects business performance and financial position. No specific competitive countermeasures are described, and maintaining market share remains an ongoing challenge.

The Group holds a substantial amount of real estate, including former factory sites and buildings, resulting from business restructuring, and has already conducted a revaluation of business-use land as of December 31, 2000, based on the "Act on Revaluation of Land." Deferred tax liabilities corresponding to the tax effect of the revaluation difference have been recorded, but a further significant decline in land prices could affect business performance and financial position.

The Group manages credit risk by setting credit limits for each business partner and recording allowances for doubtful accounts based on historical bad debt rates, among other measures. However, should a major business partner fail due to political turmoil, a severe economic downturn, or financial instability, this could affect business performance and financial position through the deterioration of trade receivables.

The Group makes extensive use of computer systems and IT networks for information transmission and core business support, and has implemented measures such as establishing an "Information System Management Regulation" and building backup systems. However, the risk of information asset leakage due to unauthorized external access or computer virus intrusion, or system malfunction due to accidents or natural disasters, cannot be completely eliminated, and if such events occur, they could affect business performance and financial position.

The Group conducts production activities in various locations both domestically and overseas, and if a natural disaster such as an earthquake or an accident such as a fire causes catastrophic damage to equipment or products at production sites, this could have a material impact on business performance and financial position. The risk of factory operation suspension due to infectious diseases (such as COVID-19) is similarly recognized, and the concentration of production sites represents a potential vulnerability.

The Group strives to ensure thorough legal compliance and ethical conduct through the establishment of a "Compliance Committee" and the formulation of the "Toabo Group Corporate Code of Conduct." However, should compliance issues arise, including legal violations by individual officers or employees, this could affect business performance and financial position. Litigation risk arising from product defects and the like is addressed through product liability insurance, but the risk remains that damages may exceed the coverage provided by such insurance.