Daito Chemix Corporation

The Group's core industries are semiconductors, flat panel displays, photography, pharmaceuticals, and environment-related fields, all of which are heavily influenced by demand trends, subject to rapid technological innovation, and characterized by short product life cycles. Should market conditions or price fluctuations occur, they may affect business performance and financial condition. Given the high degree of dependence on specific industries, an industry-wide downturn could deal a significant blow to earnings.

The Group conducts manufacturing and sales activities using raw materials linked to market prices. If procurement prices rise sharply or surge beyond expectations, cost reduction efforts and product price revisions alone may not be sufficient to absorb the increase. Rising raw material costs may compress product margins, posing a risk of adverse effects on business performance and financial condition.

While overseas transactions are basically settled in yen, dollar-denominated transactions have been increasing, expanding the impact of exchange rate fluctuations on profit and loss. Although the Group hedges risk through forward exchange contracts and other means within the scope of actual demand, there is no guarantee that such risk can be completely avoided, and it may affect business performance and financial condition.

Due to unforeseen factors such as the rapid pace of technological innovation, changes in customer needs, and the establishment of groundbreaking technologies by other companies, research and development efforts may fail to yield sufficient results. If such results are not obtained, it could lead to a decline in competitiveness and affect business performance and financial condition.

While the Group strives for stable procurement by securing multiple raw material suppliers, a supply disruption caused by an accident, quality defect, bankruptcy, public regulation, natural disaster, or other event at a raw material manufacturer could hinder production activities. A production halt could lead to lost business opportunities and issues regarding the responsibility to supply customers, posing a risk of impact on business performance and financial condition.

While the Group conducts equipment inspections and safety activities at its production sites, it cannot completely prevent natural disasters, unforeseen accidents, the spread of infectious diseases, and similar events. Should such events occur, they could result in a loss of social credibility, compensation costs, and lost business opportunities due to production stoppages, potentially affecting business performance and financial condition. The Group addresses this through the development of business continuity plans (BCP) and the procurement of insurance coverage, but complete avoidance of such risk is not guaranteed.

The Group uses a variety of information systems in the course of its business operations, and while it has established a system management framework and implemented security measures, information system failures and the leakage or falsification of confidential or personal information may occur due to power outages, disasters, unauthorized access, or other causes. The costs of responding to and compensating for such incidents pose a risk of impact on business performance and financial condition.

The Group is subject to a wide range of public regulations, including investment licensing, import/export regulations, and chemical substance regulations, and there is a risk that future tightening or significant changes to these regulations could restrict business activities. Compliance with regulations may result in increased costs, and as a chemical manufacturer in particular, trends in chemical substance regulation have a fundamental impact on the Group's business.

While the Group accumulates technology and know-how that differentiate it from other companies and strictly manages its intellectual property, it may not be able to effectively prevent unforeseen external leakage or the manufacture and sale of similar products by third parties. In addition, if the Group is sued by another company for infringement of intellectual property rights, litigation costs and business restrictions could arise, posing a risk of impact on business performance and financial condition.

The Group holds multiple affiliated companies with the aim of diversifying its revenue base, and the amount of investment may increase due to future business development. If expected results are not achieved due to changes in the economic environment, there is a risk that impairment losses on shares of affiliated companies could arise on non-consolidated financial statements. In addition, if impairment losses occur due to a decline in the profitability of fixed assets or a drop in their value, this could also affect business performance and financial condition.