KODAMA CHEMICAL INDUSTRY CO.,LTD.

Since the core business is a build-to-order business, order volumes may fluctuate due to changes in customers' ordering policies, changes in construction/manufacturing methods, competition with competitors for orders, production trends, and other factors, potentially affecting business performance. Given the nature of the build-to-order model, there is an inherent risk that demand fluctuations directly impact sales and profits. No specific countermeasures are explicitly disclosed by the company in the securities report.

Approximately 90% of consolidated net sales are attributable to the automotive industry, and sales to the largest corporate group account for approximately 40% of consolidated net sales, presenting a high customer concentration risk. If a recall or scandal were to occur at this corporate group, the impact on business performance could be substantial. As a countermeasure, the company is promoting customer diversification and sales expansion through mutual customer introductions with the acquired Mepro Holdings and through the development of new products and technologies.

Prices of main raw materials such as thermoplastic resins and metal materials including aluminum are affected by trends in various resource prices, and profitability may be squeezed if price increases cannot be passed on to product prices. In phases of surging resource prices, there is a risk of a direct decline in profit margins. The company works to curb fluctuations in purchase prices by securing multiple suppliers.

Although a quality control system has been established, unexpected product defects may result in the burden of repair costs and other expenses. In manufacturing industries such as automotive parts, increased costs associated with recall responses and loss of trust from customers can have a material impact on business performance. The company has established quality control standards and is working to implement thorough management and appropriate responses.

While the company diversifies fundraising through borrowings from financial institutions and syndicated loans, breaching financial covenants attached to these contracts could trigger obligations for early repayment, potentially affecting business performance and financial condition. In phases of deteriorating financial indicators, there is a risk that impacts on cash flow could become apparent. The company aims to reduce dependence on specific funding sources by diversifying its fundraising methods.

There is translation risk in that consolidated earnings are affected by exchange rate fluctuations when translating the local currency-denominated financial statements of overseas group companies into yen. In a yen appreciation phase, sales and profits of overseas operations may decrease after translation into yen, potentially adversely affecting consolidated business performance. No specific countermeasures such as foreign exchange hedging are explicitly disclosed in the securities report.

The company is subject to various laws and regulations in each country where it operates, and unexpected changes in legal regulations may affect business performance and financial condition. In particular, in multinational operations, changes in environmental regulations, trade regulations, and other rules can directly affect business operation costs and market access. The company strives to grasp changes in laws and regulations as well as political and economic conditions through its affiliated companies.

If natural disasters such as typhoons, earthquakes, and fires, or infectious diseases such as novel viruses, occur on a scale far exceeding expectations, this may adversely affect financial position and business results through prolonged shutdowns of business sites and significant impacts on customer industries. Given the business structure dependent on build-to-order manufacturing and the automotive industry, there is also an inherent risk of ripple effects across the entire supply chain. The company has established a crisis management system and measures in preparation for emergencies.

If the profitability of fixed assets declines due to changes in the business environment or other factors, making recovery of the invested amount unlikely, the company may recognize impairment losses. In manufacturing industries with large capital expenditure scale, recognition of impairment losses poses a risk of temporarily causing a significant deterioration in profit and loss. The company appropriately evaluates and reflects recoverability based on impairment accounting standards.

The company has acquired Mepro Holdings, and delays in realizing synergies during the group integration process or the occurrence of unexpected costs may affect business performance. While synergy effects are expected through mutual customer introductions and sales expansion activities, the state of the integration management framework directly affects outcomes. No specific details of the management framework for integration risk are explicitly disclosed in the securities report.