SHOWA PAXXS CORPORATION

Since the company's primary customers are in the materials, food, and agriculture/fisheries industries, there is a risk that sales may decline in tandem with reduced customer production during economic downturns. Natural disasters, infectious disease outbreaks, and global supply chain disruptions caused by soaring resource prices could similarly affect results. The company strives to appropriately manage and prevent risks surrounding its business, but states that predicting economic fluctuations is difficult.

Sales, expenses, and assets denominated in local currency at Showa Paxxs (Thailand) Co., Ltd. are affected by exchange rate fluctuations when translated into yen, and foreign-currency-denominated product prices and sales are similarly affected. However, since the share of Showa Paxxs (Thailand)'s sales and assets in the consolidated financial statements each falls within the range of 10-20%, the scale of the risk is inherently limited.

The Heavy-Duty Packaging Bags segment relies primarily on kraft paper, while the Film Products segment relies primarily on resins (polyethylene and polystyrene resin) as raw materials, and the prices of these materials significantly affect the cost ratio. It is feared that a continued rise in raw material prices would have a substantial impact on business results; since prices fluctuate due to various domestic and international factors, forecasting is difficult.

The Group holds investment securities such as equities, and a significant decline in stock market conditions could result in valuation losses, temporarily affecting business results and financial condition. As of the end of FY2026 (ending March 2026), stock market conditions had risen significantly compared to the end of the previous fiscal year, and the market value of held securities greatly exceeded acquisition cost, with only a very small number of holdings valued below acquisition cost.

Retirement benefit expenses and retirement benefit obligations are calculated based on actuarial assumptions such as the discount rate and the long-term expected rate of return on pension assets, and if actual results differ from these assumptions, business results and financial condition may be affected. It is reported that during the current period, actual results did not deviate significantly from the assumptions.

Unexpected regulatory changes or uncertainty in the application of laws in the countries and regions where the company operates could adversely affect its business, results, and financial condition. The company is also subject to environmental laws and regulations concerning air pollution, water pollution, waste disposal, and product recycling, and if environmental regulations are strengthened in the future, additional costs may arise for removing hazardous substances, among other measures. As of the end of the current period, the company recognizes no cases requiring a response, but states that future prediction is difficult.

In the event of natural disasters such as earthquakes or typhoons, or accidents such as fires, damage to facilities at business sites could interrupt operations and delay production and shipments. Repairing damaged facilities would require substantial costs, and the company states that this could have a material impact on its business, results, and financial condition, and that forecasting is difficult.

If unexpected bad debts materialize due to credit concerns at business partners, the recording of allowances for doubtful accounts may be necessary, potentially affecting financial position or business performance. As a countermeasure, the company has partially concluded receivables guarantee contracts with guarantee companies for business partners judged to have lower creditworthiness, thereby protecting trade receivables and managing credit conditions; however, the risk of unforeseen bad debts occurring remains.