FUJIKURA KASEI CO.,LTD.

The financial statements of overseas subsidiaries are prepared in foreign currencies and are affected by exchange rate fluctuations upon conversion into yen. The overseas sales ratio has remained at a high level, at 51.3% in FY2024 (ending March 2024), 51.6% in FY2025 (ending March 2025), and 46.6% in FY2026 (ending March 2026), and depending on exchange rate movements, this may affect business performance and financial condition. As a hedge against this risk, the Company enters into forward foreign exchange contracts and similar measures as needed, but states that complete avoidance is difficult.

The Group operates global bases in North America, Europe, Southeast Asia, and other regions, and changes in the political and economic conditions, laws and regulations, and natural environment specific to each country may affect its business. If unforeseen events such as terrorism, war, or natural disasters occur, there are concerns about the impact on business performance and financial condition. The Group strives for early recognition and response through local information gathering and the use of external consultants.

Petrochemical products are used as raw materials for major products, and significant fluctuations in crude oil prices directly affect raw material costs through naphtha prices and similar factors. Significant fluctuations in the international oil market may affect business performance and financial condition. The Group works to mitigate cost fluctuations through concentrated purchasing and geographic diversification of suppliers.

Some raw materials are highly dependent on specific manufacturers, and there is a risk that procurement may become difficult in the event of a supply chain disruption due to natural disasters, accidents, or similar events, making it impossible to fulfill the responsibility of supplying customers. This may result in an adverse impact on business performance and financial condition. The Group strives to build a stable procurement system through multiple sourcing, global procurement, and promoting interchangeability of raw materials.

With accelerating technological innovation and global business expansion, there is a risk of intellectual property disputes with third parties. If unjustified infringement of intellectual property rights or disputes occur, this may affect business performance and financial condition. The Group has established a management system based on regulations concerning information assets and promotes product and technology development that respects the rights of others.

The Group is subject to the Act on the Evaluation of Chemical Substances and Regulation of Their Manufacture, etc., the Water Pollution Prevention Act, the Waste Management and Public Cleansing Act, and chemical substance registration laws and regulations in various countries, and business performance may be affected by new laws, regulations, or ordinance revisions. The Group is implementing various measures to optimize the management of each group company and ensure legal compliance.

Major production sites are concentrated in Tochigi Prefecture, and if an accident such as a natural disaster or fire causes asset losses to manufacturing facilities, products, or other assets, this may lead to a decline in sales due to operational suspension or delays in production and shipment, as well as substantial costs for facility restoration or replacement. Although safety measures such as ISO45001 certification have been implemented, the risk concentration due to the centralized location remains.

The spread of infectious diseases such as COVID-19 may lead to a decline in sales through operational suspension due to employee infection, supply chain disruption, and reduction in customers' business activities, which may affect business results. The Group is working to prevent the spread of infection by thoroughly implementing hygiene management and measures such as remote work.

The Group holds tangible fixed assets such as manufacturing facilities, and if significant deterioration of the business environment or a decline in profitability necessitates the recognition of impairment losses, this may affect business performance and financial position. The Group strives to reduce risk by regularly monitoring potential impairment risk and accurately grasping business profitability.

The Group recognizes cyberattacks, unauthorized access, information leaks, and similar issues as important management challenges, and information leaks or system failures may lead to business suspension and response costs that affect financial position and business results. In addition to risk reduction activities, employee training, and formulation of an information security policy by the Information Security Subcommittee, the Group has established a system including external institution evaluations, introduction of cyber insurance, and development of incident response procedures.