Rengo Co., Ltd.

Paperboard and corrugated board products are significantly affected by domestic economic conditions, and demand declines or intensified competition due to economic downturns may impact operating results and financial condition. As countermeasures, the company aims to minimize risk by securing orders for food-related applications where stable demand is expected, building trading relationships with a wide range of industries, and promoting sales activities that propose high-value-added packaging.

Key raw materials such as corrugated waste paper, pulp, and plastic materials, as well as fuels such as city gas, LNG, and biomass, are affected by domestic and overseas demand trends and international commodity market conditions, creating risks of price increases or procurement shortages. Fluctuations in the supply-demand balance and supply chain disruptions may lead to increased costs or difficulty securing necessary quantities, which could impact operating results and financial condition. The company addresses this through productivity improvements, investment in resource- and energy-saving equipment, and fuel diversification.

If manufacturing sites are damaged by large-scale natural disasters such as earthquakes or typhoons, or by the spread of large-scale infectious diseases, business activities may be interrupted, potentially impacting operating results and financial condition. The company strives to build a system that can continue product supply even when a specific business site is disrupted, by utilizing its nationwide network of manufacturing sites.

The company operates its Paperboard and Paper Processing Business, Flexible Packaging Business, and Heavy-Duty Packaging Business in China, India, Southeast Asia, Europe, and North America as growth markets, and overseas sales accounted for 21.1% of total sales in the current consolidated fiscal year. If risks such as exchange rate fluctuations, natural disasters, epidemics, or economic and political risks specific to each country materialize, this could impact operating results and financial condition. The company seeks to minimize such risks through timely information gathering and sharing between group companies and responsible departments.

Interest-bearing debt outstanding at the end of the current consolidated fiscal year amounted to ¥483,980 million, and if market interest rates rise, the resulting increase in interest payment burden could impact operating results and financial condition. Although the company is actively working to reduce interest-bearing debt, the large outstanding balance means sensitivity to interest rate fluctuation risk remains at a high level.

Regarding marketable securities held mainly in business partners, a decline in stock prices could impact operating results and financial condition. In addition, since pension assets are also affected by stock price levels, there is a risk that stock price fluctuations could spill over into business performance through changes in retirement benefit expenses.

There is a risk of being affected by exchange rate fluctuations in import and export transactions of products, raw materials, and fuel. In a yen depreciation phase, this could impact operating results and financial condition through increased raw material and fuel procurement costs, while in a yen appreciation phase, through decreases in the yen-converted value of overseas sales, among other effects. With overseas sales accounting for 21.1% of total sales, sensitivity to exchange rate fluctuations remains correspondingly high.

In the process of selecting and concentrating businesses to increase corporate value, one-time losses associated with asset sales or business withdrawals may occur, potentially impacting operating results and financial condition. Depending on the scale and content of business restructuring, short-term impacts on performance may arise, and investors need to continuously monitor progress.

In the course of domestic and overseas business activities, the company bears the risk of being subject to litigation related to intellectual property, the environment, and other matters, and depending on the content of such litigation, this could impact operating results and financial condition. As a countermeasure, the company promotes compliance-oriented management, including adherence to laws and regulations, and strives to minimize risk by conducting training and education tailored to different levels of officers and employees.

In addition to the risks listed above, it is recognized that unforeseen circumstances could impact operating results and financial condition. While no specific events have been identified, the company has indicated a policy of responding through the development of a broad-based risk management system.