POVAL KOGYO CO.,LTD.

The Company Group's products are highly dependent on the domestic market, and if domestic investment by major customers in the automotive, steel, food, and display industries stagnates, this may affect operating results and financial condition. The Group is responding by reviewing its business portfolio, deepening domestic sales activities, and expanding overseas sales channels.

The price of resin, a key raw material, fluctuates due to the supply-demand balance and economic conditions in producing regions, and if such fluctuations cannot be absorbed through improved material yield or passed on to selling prices, this may affect operating results and financial condition. The Company is responding by stockpiling raw materials in anticipation of market fluctuations, improving procurement methods, and developing alternative materials.

Some raw materials used are sourced from a limited number of suppliers, and although stable supply agreements have been concluded, an unforeseen event could halt supply and disrupt production activities. The Company currently maintains the inventory levels necessary for business continuity while continuing to develop new procurement sources.

In the fiscal year under review, the AGC Group accounted for 19.6% of consolidated net sales, and future order trends from this customer may affect operating results and financial condition. In particular, any change in the AGC Group's overseas production strategy (downsizing, relocation, or withdrawal) could directly affect the performance of the Company's overseas subsidiaries, resulting in a high degree of risk concentration.

The Company conducts production and sales activities in Thailand and China, and unforeseen changes in the political, economic, or social environment in these regions could disrupt business activities and affect performance. The Company strives to proactively gather, analyze, and respond to information on legal amendments, policy changes, and other developments by utilizing local staff and external consultants.

If a serious defect or deficiency occurs in a manufactured and sold product, this could damage brand trust and result in liability for damages, thereby affecting operating results and financial condition. The Company conducts strict quality inspections at each stage of material acceptance, in-process, and shipping, implements recurrence prevention measures through monthly quality meetings, and maintains liability insurance coverage.

If a pandemic-induced lockdown or a large-scale natural disaster exceeding expectations occurs, operations at each site could be suspended or disrupted, hindering business activities. The Company addresses this through business continuity planning (BCP), including diversifying factory and office locations, establishing a bridge system for alternative production, implementing disaster prevention and earthquake resistance measures, and developing emergency response regulations.

Against the backdrop of a declining birthrate, an aging population, and a more fluid labor market, an inability to secure necessary personnel could affect the Company's sustainable growth. Under the banner of human capital management, the Company is promoting HR initiatives including support for individual career development, enhancement of organizational workplace capability, and training programs for middle management.

If accumulated technical know-how or production technology is taken outside the company when personnel transfer or retire, this could affect the Company's competitive advantage and business performance. The Company addresses this through thorough confidentiality management at manufacturing sites and the conclusion of confidentiality agreements with employees upon their retirement.

If an unexpected incident such as unauthorized access, communication failure, or a power outage caused by a large-scale disaster occurs and restoration of core systems takes time, this could affect business continuity. The Company is implementing measures including the preparation of emergency response manuals, data backups, and migration of systems to the cloud, and is working to establish a system for early recovery.