TAKAGI SEIKO CORPORATION

Prices of petrochemical raw materials (plastics, paints, etc.) may fluctuate significantly, and if there is a delay in passing on price increases to product prices, profitability will deteriorate. The Group recognizes the risk of delays in price pass-through, but specific details of hedging measures have not been disclosed.

Since local currency-denominated items such as overseas subsidiaries' sales, expenses, assets, and liabilities are translated into yen, fluctuations in exchange rates affect the consolidated financial statements. The ratio of sales at overseas locations for the consolidated fiscal year under review reached 35.1%, and the impact of exchange rate fluctuations is of a scale that cannot be ignored.

The Group manufactures and sells plastic molded products to order for the automotive industry and OA equipment industry, and market trends in these specific industries directly affect business performance. If clients revise their business strategies and choose to shift to in-house production or relocate/withdraw production bases overseas, there is a risk that order volumes will decrease.

In the plastic products manufacturing industry, competition within the industry is intensifying as domestic manufacturers expand overseas, leading to consolidation and elimination of companies. If rapid technological innovation, changes in customer needs, or intensified price competition occur, the Group's competitive advantage may be undermined, potentially resulting in lost orders.

The Group has been engaged in the manufacture and sale of plastic products and molds for over 60 years since its founding, and is working on new technology development, but there is no guarantee that it can always present new technologies that meet customer requirements. If the Group is unable to make proposals with an advantage over competitors and loses orders, this may affect the financial position and business results.

If a specific production facility is shut down for a certain period due to natural disasters such as earthquakes, or fire/explosion accidents, delays in product delivery and substantial investment in facility restoration may occur. The Group has production facilities dispersed both domestically and overseas based on the concept of optimal-location production, and conducts regular inspections and awareness-raising through its Health and Safety Committee, but the risk cannot be completely eliminated.

If an accident occurs due to a product defect, product liability claims and recall costs may arise, potentially affecting the financial position and business results. The Group exercises caution in quality control through ISO certification and other measures, but there is no guarantee that all products will be free of defects in the future.

If unauthorized access, information leakage, or data destruction occurs due to cyberattacks or other means involving clients' confidential information or the company's internal confidential information related to technology, contracts, and personnel, business continuity may be disrupted. Specific details of information security measures have not been disclosed, but this is explicitly recognized as a risk.

With an overseas production ratio of 36.9% and an overseas sales ratio of 35.1% for the consolidated fiscal year under review, dependence on overseas operations is high, and there is a risk of delays or suspensions in raw material procurement, production, and sales due to changes in laws, regulations, and tax systems in the countries where the Group operates, changes in political and socio-economic conditions, or infectious diseases, large-scale disasters, terrorism, war, etc. These risks may materialize due to rising geopolitical uncertainty.

There are some raw materials and parts for which alternative procurement sources are difficult to find for the Group and its business partners, and if procurement from specific countries or regions becomes difficult due to trade friction, conflicts, or lockdowns caused by pandemics, this could lead to a decline in production activities or a decrease in order volumes. Supply chain concentration risk may affect the financial position and business results.