J-MAX Co., Ltd.

The Company relies on the automotive-related market for the majority of its net sales, and global competition is expected to intensify due to technological transformation accompanying electrification and decarbonization, supplier alliances, the rise of overseas emerging manufacturers, and entry by companies from other industries. The business is also susceptible to economic conditions, and market fluctuations may affect the financial position, business results, and cash flows. In response, the Company is promoting the mid- to long-term five-year plan "J-VISION 30," focusing on transformation into an electrification supplier and business structure reform as key themes.

Price competition in the automotive parts industry is extremely severe both domestically and internationally due to supplier alliances, entry by companies from other industries, and the rise of local emerging manufacturers. The Company may be unable to maintain or expand market share and secure profits. In response, the Company is working to capture electrification demand, enhance added value through the promotion of R&D related to in-vehicle batteries, and improve production efficiency and reduce costs through the establishment of new plants, among other measures.

If technological development cannot keep pace with the advance of new technologies and new products accompanying changes in the automotive-related market, or with the spread of new materials and manufacturing methods, this may affect the financial position and business results. Under "J-VISION 30," the Company has set "creation of new businesses" as a growth strategy and is promoting the development of new products and businesses that address social issues, not limited to the automotive field.

In the fiscal year under review, net sales to Honda Motor Co., Ltd. and its affiliated companies accounted for 49.8% of consolidated net sales, meaning that fluctuations in that group's business performance directly affect the Company's financial position, business results, and cash flows. To diversify this risk, the Company is promoting the expansion of transactions with other finished vehicle manufacturers and in-vehicle battery manufacturers, working to reduce its dependence.

Press-Molded Parts, a key product, are composed of procured materials such as steel, and delivery delays or supply disruptions due to deterioration in suppliers' business conditions, as well as sharp fluctuations in market prices leading to soaring material and parts costs, may affect stable production and profitability. In addition to a procurement policy based on multiple competing suppliers, promotion of global procurement, and process and inventory management checks by the purchasing department, the Company continuously negotiates to pass on the impact of raw material price increases to selling prices.

If a product defect that could lead to a recall occurs in the future, substantial quality-related costs may be incurred. In addition to establishing a quality management system through ISO9001 certification, the Company has built and operates mechanisms such as a Global Quality Meeting organized across all group companies, working to strengthen quality.

Due to factors such as increased processing man-hours during the quality maturation process for Dies, etc. for sale, the actual manufacturing cost at completion may increase beyond expectations, reducing profitability. The Company is working to minimize the difference between estimated and actual manufacturing costs through advances in manufacturing technology, such as higher-precision molding analysis and the introduction of high-performance equipment, as well as monthly cost management through evaluation meetings and other means.

In the fiscal year under review, overseas subsidiaries' sales accounted for 62.6% of consolidated net sales, and exchange rate fluctuations beyond expectations may affect the financial position, business results, and cash flows. The Company is working to minimize the impact of exchange rates by localizing management resources, including local procurement of raw materials and parts.

Changes in the financial market environment, rising interest rates, changes in credit ratings, deteriorating business performance, and other factors may worsen borrowing terms, leading to increased fund procurement costs, difficulty obtaining new loans, or, if the cash flow necessary for repayment cannot be secured, disruption to cash management. The Company is working to maintain trust with its main banks through regular information sharing and explanations of management improvement plans, diversify funding sources, secure liquidity on hand by reviewing capital expenditures, reducing inventory assets, and selling unnecessary assets, and improve its financial standing through business restructuring.

As the Company operates businesses in Japan and the Asia region, natural disasters, infectious diseases, wars, terrorism, strikes, and other events may cause delays or stoppages in the procurement of raw materials and parts, manufacturing, sales, and logistics. In addition, soaring resource and energy prices and disruptions to logistics networks due to worsening international conditions and heightened geopolitical risk may affect the financial position, business results, and cash flows. In addition to formulating and operating business continuity plans, the Company is working to improve resilience to production cuts and profitability through continuous cost reduction activities and appropriate selling price adjustments.