NIPPON CARBIDE INDUSTRIES CO.,INC.

In the Electronics field (for semiconductors and electronic devices) and the Safety field (for environment, pharmaceuticals/cosmetics, and automobiles), a decline in sales volume or price could affect operating results, financial condition, and future performance. Based on the medium-term management plan "NCI Kirari 2025," the Company is promoting the enhancement of product added value and the establishment of a profit structure less susceptible to changes in the business environment.

Fluctuations in naphtha and aluminum ingot prices affect businesses such as adhesives, Electronic Materials, Building Materials-related, and Engineering, and if price pass-through is delayed, increased costs could put pressure on performance. This risk could become more pronounced due to rising crude oil and naphtha prices amid recent geopolitical tensions, as well as increased logistics costs and longer procurement lead times caused by disruptions to maritime shipping routes. The Company is addressing this through the development of new domestic and overseas procurement sources and the sharing of purchasing information within the group.

The Company conducts extensive overseas business, particularly in Electronic Materials and Film & Sheet Products, and fluctuations in exchange rates affect operating results and financial condition both in terms of translation of consolidated financial statements (stock aspect) and in the setting of sales and purchase prices (flow aspect). While the Company uses forward exchange contracts for some transactions to reduce risk, not all transactions can be hedged.

As the majority of consolidated subsidiaries are overseas subsidiaries engaged in production and sales activities around the world, there exists a risk of social and political disruption due to unforeseeable changes in laws and regulations, import/export restrictions, economic sanctions, terrorism, war, infectious diseases, and the like. Should such risks materialize, they could disrupt global business activities and affect operating results, financial condition, and future performance. The Company strives for prevention and avoidance through information gathering within the group and the engagement of external consultants.

Year-on-year tightening and revision of environment-related regulations may give rise to costs related to manufacturing, storage, and disposal, which could affect performance. As climate change risks, the Company recognizes the introduction of carbon taxes, rising energy costs, and equipment damage from the intensification of natural disasters, while also viewing expanding demand for decarbonization equipment and EV-related demand as opportunities. The Company's policy is to respond in a timely manner to changes in global warming countermeasures in order to mitigate risk.

If a large-scale natural disaster causes interruption of business activities, damage to production facilities, suspension of product transportation, or damage to the supply chain, a prolonged production halt could reduce sales and significantly affect operating results, financial condition, and future performance. The Company has implemented measures such as a risk management manual, business continuity plans, an employee safety confirmation system, earthquake resistance measures, and disaster drills, but there are limits to its ability to respond to situations exceeding these assumptions.

If core systems are shut down due to unforeseen events such as cyberattacks, computer virus infections, or natural disasters, and recovery takes time, this could affect operating results, financial condition, and future performance. In addition to measures for early recovery such as data backup and migration of systems to the cloud, the Company has established a defense and detection system against cyberattacks by strengthening network and system security.

If held fixed assets experience a decline in market value, reduced profitability, or become idle assets, asset value may decline, which could affect operating results and financial condition. As a manufacturing company holding numerous production facilities and real estate, impairment risk is prone to materialize during changes in market conditions or business contraction phases.

Although the Company has established a quality control system based on ISO9001, a large-scale product accident could occur due to unforeseen events. While the Company has liability insurance coverage, if costs exceeding that coverage arise, this could affect operating results, financial condition, and future performance.

Amid the continuing significant decline in the working-age population, if the Company is unable to secure the necessary excellent talent, this could affect business development and performance. The Company is actively working on improving the workplace environment, securing diverse talent, human resource development, and career development, proceeding under the policy that human resources are the foundation of all business activities.