KANTO DENKA KOGYO CO.,LTD.

Fluorine-based products for semiconductor and LCD applications, the Company's mainstay products, are supplied to industries subject to large cyclical market fluctuations, and sudden changes in the supply-demand environment directly affect business performance. Furthermore, technological innovation downstream carries the risk that demand for related products could disappear entirely. No specific countermeasures have been disclosed by the Group.

The Company is exposed to intense competition from manufacturers in Korea, China, and elsewhere. If the Company loses its technological or quality advantage, it risks falling into price competition, leading to a decline in sales share and sales prices. The Company is working to maintain and strengthen its competitiveness, but specific details of these measures have not been disclosed.

Electricity is the largest raw material cost, and the Company also purchases tungsten, anhydrous hydrofluoric acid, ethylene, industrial salt, lithium compounds, and other major raw materials. If price fluctuations or procurement disruptions occur with respect to these raw materials and fuels, the Company may be unable to pass on the costs to product prices in a timely manner, potentially worsening business performance. The Company addresses this through efficient materials procurement and passing costs through to product prices.

The Company has conducted analysis based on TCFD recommendations. Under the 4°C scenario, risks include flood damage and business suspension at domestic sites due to more frequent and severe extreme weather events. Under the 2°C (1.5°C) scenario, risks include cost increases from the introduction of carbon pricing and declining demand for specialty gas products with high global warming potential. These risks may affect both business profitability and the product portfolio.

The Company holds numerous fixed assets, including manufacturing facilities. If there is a significant deterioration in business profitability or a marked decline in the fair value of held assets, the Company may need to recognize impairment losses, which could have a material impact on business performance. No specific countermeasures have been disclosed.

If system failures or leaks of confidential or personal information occur due to external attacks, unauthorized access, computer virus infection, or similar causes, there are concerns about reputational damage and impact on business performance. The Company addresses this through the establishment of an information security basic policy, guidelines, and internal information management regulations, hardware and software measures, and ongoing employee training.

If manufacturing or quality troubles occur and recovery takes time, production may be suspended and issues may arise regarding the Company's responsibility to supply customers, affecting business performance. The Company has product liability insurance, but this may not cover all costs ultimately incurred, and the Company addresses this risk by striving for stable operations and quality maintenance.

The Company is investing management resources in the development of new products that will serve as pillars of profit, but if development does not proceed as planned, or if products fail to match market needs at the time of launch, business performance may be affected. No specific hedging measures against development risk have been disclosed.

As a company that handles chemical substances, if hazardous substances leak outside the Company, this could result in loss of public trust, compensation costs, and opportunity losses due to production suspension. Depending on trends in various environmental regulations concerning soil and groundwater contamination, air pollution, water pollution, and waste disposal, legal and social responses may be required regarding past, present, and future business activities, potentially affecting business performance.

While the Company is strengthening its overseas business activities, primarily in East Asia, there are risks such as unexpected changes in laws and regulations, changes in political and social conditions, terrorism, and infectious diseases. If these risks materialize, they could have a material impact on the continuity of local operations and business performance, and no specific countermeasures have been disclosed.