ALPHA Corporation

The Automotive Parts Business accounted for 79.0% of consolidated net sales in the fiscal year under review, with sales to the Nissan Motor group alone representing a highly concentrated 30.8% of the total. Deterioration in production trends at major customers, a decline in installation rates, or reductions in product delivery prices could directly and adversely affect the Group's operating results. The Group has adopted a policy of expanding business with automakers outside the Nissan group and expanding sales outside the Automotive Parts Business.

The Automotive Parts Business is the Group's core business, accounting for 79.0% of consolidated net sales, and the occurrence of serious defects such as recalls or service campaigns could adversely affect operating results. Although the Group makes every effort to prevent the occurrence of product defects, quality issues can lead not only to financial losses but also to deterioration of customer relationships. The Group is working to strengthen its quality control system to prevent the occurrence of defects.

Sales from overseas locations accounted for 71.8% of consolidated net sales in the fiscal year under review, exposing the Group to the effects of foreign exchange rate fluctuations through both translation risk and transaction risk. In addition, increases in corporate funding costs due to policy interest rate hikes also constitute a business risk. The Group is working on risk hedging through expansion of local procurement and local production, promotion of yen-denominated contracts, and timely foreign exchange forward contracts.

The Group procures raw materials and parts used in product manufacturing from external sources, and significant price fluctuations due to changes in market conditions could lead to increases in purchased parts costs and manufacturing costs. If such costs cannot be passed on to sales prices, or if suppliers are unable to sufficiently absorb the costs, future profitability may be adversely affected. The Group monitors market trends and periodically checks the degree of impact at various meeting bodies, including the Board of Directors.

Global geopolitical risks, such as the situation in Ukraine and Russia and the situation in the Middle East, as well as changes in U.S. trade policy, could affect financial position and operating results through surges in energy prices and procurement costs, disruption of supply chains, and fluctuations in foreign exchange rates. Due to the prolonged geopolitical risks, the economic outlook remains uncertain. The Group has established a system to gather and monitor information from each location and take necessary measures in a timely manner.

As the Group supplies automotive parts-related products globally, an unexpected sharp economic downturn and demand contraction in major markets such as Japan, Asia, North America, and Europe could significantly adversely affect operating results and financial position. Attention must also be paid to the impact on existing business models of changes in industrial structure resulting from recent rapid technological innovation. The Group monitors and examines overall global economic trends as well as trends in specific regions at various meeting bodies, including the Board of Directors.

Because the Group operates globally, it is exposed to country risks such as infrastructure disruptions from natural disasters or accidents, and war, terrorism, strikes, and operational disruptions. If such events occur in the markets for procuring materials, parts, and supplies, or in the markets for manufacturing, distribution, and sales of products, they could impede or delay business operations and adversely affect business performance and financial condition. The Group monitors developments in countries around the world from each location and has established a system to take necessary measures in a timely manner.

While the Group conducts business activities in accordance with various laws and regulations both in Japan and overseas, the introduction of new laws and regulations or unexpected regulatory changes could impose constraints on business activities and increase costs. If authorities determine that regulations have been violated, the Group may become subject to administrative or criminal penalties, litigation, and other measures such as fines, potentially damaging its social reputation. The Group is working to ensure thorough legal compliance across the entire Group.

Fixed assets such as tangible fixed assets, goodwill, and intangible assets are exposed to impairment risk, and if the economic value of held fixed assets declines due to deterioration in various market conditions, a decline in demand, or changes in development plans, additional impairment losses may need to be recognized. In such cases, this could have a material impact on future financial position and business performance. The Group currently implements necessary impairment processing and conducts timely and appropriate performance management and management guidance and advice for each location.

If a third party files an injunction lawsuit or claims damages on the grounds of infringement of patents or other rights, or if the Group's competitive advantage is undermined by third-party infringement of intellectual property rights, this could adversely affect business performance. The Group regards intellectual property as an important management resource and strives to prevent infringement of third parties' intellectual property rights and to protect its own intellectual property rights.