DYNIC CORPORATION

Competition is intense across the Printing & Information-Related Business, Housing & Living Environment-Related Business, Packaging Materials-Related Business, and other segments, and competition may intensify further, particularly for Wall Covering Materials, vehicle interior materials, and similar products. While the company is pursuing cost reductions to counter competitors, declines in selling prices may affect business performance. There is also a risk that the market value of make-to-plan products may decline due to competitive pressures.

The company uses petroleum-related products extensively as key raw materials, creating risks such as difficulty in stable procurement due to natural disasters or abnormal weather, and requests for price increases amid soaring crude oil prices or yen depreciation. While the company monitors market prices and negotiates with suppliers, a sharp rise in market conditions could increase raw material costs and affect business performance.

The company has nine overseas affiliated companies, including in China, and its strategy involves active investment in overseas markets, but business operations may be affected by regulatory, economic, social, and political risks in each country. In addition, as the scale of foreign-currency-denominated transactions tends to expand, the risk that exchange rate fluctuations will affect receivables/payables, net sales, and profit is also increasing. Although the company has taken measures to mitigate foreign exchange risk, complete avoidance is difficult.

At the end of the fiscal year under review, the balance of borrowings stood at ¥17,599 million (down ¥1,870 million year on year), with the ratio to total assets remaining high at 28.4%. Fluctuations in market interest rates may directly affect business performance through interest expense, and an increase in financial costs is a concern in a rising interest rate environment.

The company holds investment securities with a balance of ¥8,107 million, and valuation losses may arise due to poor performance of investee companies or deterioration in securities market conditions. The occurrence of valuation losses directly affects profit or loss for the period and net assets, posing a risk of deteriorating financial condition.

The company continuously invests in manufacturing equipment and other facilities to improve production capacity, quality, and productivity, and holds substantial fixed assets. If indications of impairment arise, such as a significant decline in market value or continued negative operating income, and future cash flows are judged to fall below book value, an impairment loss may occur, potentially having a material impact on business performance.

Natural disasters such as earthquakes and floods, as well as terrorism or widespread outbreaks of infectious disease, could cause catastrophic damage to production plants or temporary closure of production and sales facilities. Business interruption could delay production and shipment, reducing net sales, and repairing or rebuilding damaged facilities could require substantial costs. There is also a risk of disruption to raw material procurement and sales networks.

If time- or volume-based restrictions on power supply or power outages occur in regions where business sites are located, some or all operations may be suspended, disrupting production and shipment. Given the nature of the manufacturing business, dependence on electric power is high, and tight power supply-demand conditions pose a risk to the business, performance, and financial condition.

Although the company manufactures products with careful attention to quality control, there is no guarantee that all products are free of defects or that claims will not arise in the future. If a large-scale product incident occurs, in addition to substantial cost burdens, there could be a serious impact on corporate reputation, potentially worsening business results and financial condition.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate, and there is a risk that expenses and obligations may increase if a gap arises between assumptions and actual results due to deterioration in the pension asset investment environment, or when retirement benefit or pension plans are changed. An increase in retirement benefit expenses may affect business results and financial condition.