AuBEX CORPORATION

The Group has customers in countries around the world and maintains sales bases in China. Unforeseen abrupt political or economic changes, the outbreak of terrorism or war, and social disruption caused by infectious diseases may affect business performance and financial condition. Where dependence on a specific region is high, the impact when geopolitical risk materializes could be significant.

The Group uses highly specialized raw materials, and if raw material prices rise beyond expectations due to fluctuations in domestic and overseas market conditions and exchange rates, there are limits to cost reduction and passing costs on to sales prices. In addition, key raw materials are procured from specific manufacturers, and if procurement is interrupted or discontinued due to accidents or disasters, production could be disrupted. Measures are being taken by securing a certain level of inventory, but responding to a long-term procurement disruption may prove difficult.

In the Medical Products Business, official reimbursement price revisions for medical fees, drug prices, and specified insured medical materials occur once every two years, which could lead to significant price declines. In the Techno Products Business, the trend toward lower prices in the global market continues, and price decline pressure is increasing due to intensifying competition among companies. The Group addresses this through cost reductions achieved by improved productivity, but if a significant price decline occurs, it will affect business performance and financial condition.

Due to the declining birthrate and aging population, the working population is significantly decreasing, creating a risk that the recruitment and development of excellent human resources may not proceed as planned. Measures such as strengthening recruitment activities, encouraging the acquisition of qualifications, and conducting hierarchical training are being implemented, but if the labor shortage becomes severe, business continuity could be disrupted. The Group considers securing and developing human resources essential to business continuity.

The Group has established a basic information security policy and works on maintaining and managing systems and data through strengthening its security framework and providing employee training. However, if a security incident occurs or if network disruption occurs due to a disaster or other cause, business activities could be disrupted, potentially affecting business performance and financial condition. Information security and information protection are positioned as one of the most important management issues.

More than half of overseas sales are conducted in yen-denominated transactions, but the remainder are foreign-currency-denominated transactions, and significant fluctuations in exchange rates could result in foreign exchange losses. In the current consolidated fiscal year, foreign exchange gains were ¥16,966 thousand (compared to foreign exchange losses of ¥21,340 thousand in the previous consolidated fiscal year), and the fluctuation range is large. In addition, the translation of overseas subsidiaries' financial statements into yen is also affected by exchange rate fluctuations.

The Group has obtained permits, licenses, and product approvals under the Pharmaceuticals and Medical Devices Act, and manufactures and sells products under strict quality control based on ISO13485:2016. Should a quality problem occur, it could lead to voluntary recalls, suspension of sales, and liability for damages, potentially having a material impact on business performance and financial condition through decreased sales or increased costs. Given the nature of medical devices as products, quality problems are also directly linked to corporate credibility.

In manufacturing at domestic plants, revisions and strengthening of laws and regulations related to the environment, chemical substances, and safety and health are progressing. The Group addresses this by gathering information through participation in seminars and introducing environmentally friendly equipment, but if regulations become stricter than expected, additional cost burdens will arise, potentially affecting business performance and financial condition.

If a natural disaster such as an earthquake or typhoon, or an accident such as a fire occurs, damage to facilities or difficulty in power supply could interrupt operations, delaying production and shipment. Measures such as formulating a BCP plan, introducing a safety confirmation system, and conducting disaster prevention drills are being implemented, but if substantial costs are incurred to repair facilities, it will affect the business, business performance, and financial condition.