NIPPON KODOSHI CORPORATION

While Separators for Aluminum Electrolytic Capacitors, the company's core product, holds a high market share, the structure is such that global demand trends directly affect overall business performance. To minimize the impact of demand fluctuations for specific products on business performance, the company is working to expand sales of Functional Materials (Separators for Electric Double-Layer Capacitors, etc.) and create new businesses.

Against the backdrop of intensifying global competition among capacitor manufacturers, there is a possibility that downward pressure on the selling prices of Separators for Aluminum Electrolytic Capacitors will strengthen in the future. As a countermeasure, the company promotes research and development to meet customer and market needs, and seeks differentiation through high-quality, highly reliable products.

Since part of product sales and raw material procurement is conducted in foreign currency-denominated transactions, fluctuations in foreign exchange rates may affect foreign currency-denominated assets and liabilities. The company has established foreign exchange risk management regulations and utilizes forward exchange contracts and foreign currency-denominated borrowings, but the risk cannot be completely eliminated.

Much of the pulp, the main raw material, is imported from overseas, and if a supply shortage occurs due to climate change or political instability, procurement costs may rise or procurement may become difficult. The company strives for stable procurement by maintaining, in principle, a two-supplier purchasing system, switching to raw materials with less supply uncertainty, and securing inventory.

Electricity and LNG are used in separator manufacturing, and fluctuations in their prices may affect business performance. The company strives to reduce energy usage through capital investment that achieves energy-saving effects and the promotion of energy-saving activities, but the risk of price fluctuations cannot be completely avoided.

The company is systematically implementing capital investment to increase production capacity, but since the construction or expansion of manufacturing facilities requires substantial investment, the increased burden of depreciation expenses and increased interest payments due to increased borrowings may temporarily affect business performance. The company seeks to minimize this impact by implementing planned investments based on demand forecasts.

Stable recruitment and retention of personnel necessary for product development and manufacturing is essential for maintaining and improving competitiveness, and a shortage of personnel could hinder business operations. The company seeks to retain personnel by promoting health management and creating a comfortable work environment, including being selected as an "Excellent Health Management Corporation."

The occurrence of large-scale earthquakes such as a Nankai Trough earthquake, wind and flood damage, fires, infectious diseases, and the like may hinder the ability to ensure employee safety, secure raw materials, and continue production, potentially affecting business performance and financial condition. The company has built a business continuity system by diversifying production sites across three locations in Kochi Prefecture, Tottori Prefecture, and Malaysia, securing raw material and product inventories, and promoting BCP measures.

If government regulations are strengthened toward realizing a decarbonized society, or if human rights issues arise in the supply chain, this could hinder raw material procurement and the production system, potentially affecting business performance. The company is addressing this through the use of LNG, introduction of solar power generation facilities, use of electricity derived from renewable energy, and the formulation of a "Purchasing Policy" and "Green Procurement Standards."

The company holds confidential information such as technical information and customer information, and if information leakage occurs due to computer virus infection or cyberattacks, this could affect business performance through a decline in corporate value due to loss of social trust and compensation to affected customers. The company works to prevent information leakage by strengthening its security systems and conducting regular internal training.