HAVIX CORPORATION

Prices of pulp, the main raw material, as well as fuel such as heavy oil and gas, are affected by international supply-demand balance and speculative buying, and due to high dependence on overseas sources, exchange rate fluctuations also directly affect the financial position and business results. Continued tension in the Middle East situation has led to ongoing surges in energy and raw material prices, and the outlook remains uncertain for FY2027 (ending March 2027) as well. As countermeasures, the company is investigating lower-cost raw materials, improving production technology, diversifying suppliers, and implementing foreign exchange hedging.

Amid a severe competitive environment both domestically and internationally, if the company's product advantages cannot be maintained due to discount sales by competitors or the rise of inexpensive Chinese-made products, it may affect the company's financial position and business results. The company strives to quickly gather market trend information and improve product quality and cost competitiveness, while also promoting differentiation through the development of highly functional products.

In FY2026 (ending March 2026), sales to Uni-Charm Products Co., Ltd. accounted for approximately 23% of total sales, and dependence may increase further due to a manufacturing outsourcing arrangement with the company (scheduled to begin in April 2027). If transactions with this company are discontinued or significantly reduced due to policy changes or other factors, it could have a material impact on the financial position and business results. As countermeasures, the company strives to maintain a good relationship while promoting the development of new customers through quality establishment and proposals for developing new functional materials.

The production equipment for Pulp Nonwoven Fabric (Raw Fabric/Processed Products) is Finnish-made specialized equipment, the only one of its kind domestically, and there is a risk that stable operation could become difficult if unusual troubles occur or if procurement of special parts becomes necessary. Since securing alternative equipment is difficult, there are concerns about the impact on financial position and business results from production stoppage in the event of trouble. The company aims to reduce this risk by improving in-house maintenance levels and building relationships with existing and new partner companies.

If the company is unable to launch products adapted to market needs, or if the launch of new businesses, including the manufacturing outsourcing arrangement with Uni-Charm Products Co., Ltd. (scheduled to begin in April 2027), is delayed, future growth potential and profitability may decline, which could affect the financial position and business results. The company gathers information and understands market needs through meetings with business partners and participation in exhibitions, and promotes product development with a sense of speed under close schedule management.

If the acquisition of legal rights is delayed or fails in the development of new products and new technologies, competitive advantage may be undermined, potentially affecting the financial position and business results. In addition, there is a risk of infringing on third parties' intellectual property rights beyond the company's awareness, as well as a risk that the company's own intellectual property rights may be infringed upon. As countermeasures, the company works to promote the acquisition of rights and to thoroughly investigate third-party rights and appropriately manage their use.

Most logistics operations are outsourced to a specific transport company, and if transactions with this company become impossible for any reason, it could temporarily affect the financial position and business results. The company strives to maintain a good relationship with the outsourced provider while also considering the construction of an optimal logistics system.

The company's factory manufacturing equipment is subject to environmental-related laws and regulations such as the Water Pollution Control Act, the Air Pollution Control Act, and the Waste Management Act, and stricter regulations or the introduction of new regulations could affect operations and the stable supply of products. The company is also subject to the Product Liability Act, and if product quality defects cause adverse effects on human health, it could affect the financial position and business results. The company strives for environmental conservation through ISO14001 certification and works to gather information on and appropriately respond to related laws and regulations.

In addition to damage to production equipment and the incurrence of restoration costs due to fire accidents, the head office, factories, and logistics bases are concentrated in Gifu Prefecture, which is close to the designated intensified areas for the Tokai and Tonankai earthquakes, raising concerns about damage to production equipment and human and physical damage in the event of a large-scale earthquake. If natural disasters exceeding expectations occur and disrupt the production system, it could have a material impact on the financial position and business results. The company addresses this through the implementation of earthquake-resistance measures, the development of BCP and disaster prevention management manuals, and the conducting of disaster prevention drills.

If economic activity is restricted due to the spread of infectious or contagious diseases, this could lead to supply chain disruption, factory operation suspension, decreased demand, and other issues, potentially affecting the financial position and business results. The company implements infection prevention measures such as employee temperature checks, health condition monitoring, and remote work, while also working to minimize risk through the development of new customers, expansion of sales into multiple applications, and cost reduction.