DAISHIN CHEMICAL CO.,LTD.

The main raw materials for the Chemical Products Business are petrochemical products, and procurement of raw materials and raw material prices may be affected by conflicts and geopolitical risks in regions such as the Middle East, as well as overseas economic trends. In addition, expanded use of biomass naphtha by petrochemical manufacturers may also affect procurement. As a countermeasure, the Company purchases key raw materials from multiple suppliers to work toward stable procurement.

If abnormal fluctuations occur in crude oil prices or foreign exchange rates, this could directly impact the cost structure of the Chemical Products Business and affect the Group's financial position and operating results. Given the business characteristic of relying on petrochemical products as a main raw material, fluctuations in crude oil prices directly affect procurement costs. While risk is diversified by securing multiple suppliers, there are limited means to avoid market fluctuations themselves.

The Chemical Products Business, which handles various chemical substances such as organic solvents, may be affected by tightened regulations resulting from amendments to the Fire Service Act, the Poisonous and Deleterious Substances Control Act, and environment-related laws and regulations. Tightened regulations could result in restrictions on business activities and increased compliance costs. As a countermeasure, the Company strives to obtain the latest information at an early stage through thorough legal compliance and active participation in seminars held by administrative agencies and industry associations.

Transportation operations are subject to regulation under various laws and regulations, including the Motor Truck Transportation Business Act, the Fire Service Act, and the Poisonous and Deleterious Substances Control Act. If a violation of laws or regulations occurs, this could result in suspension or revocation of licenses and have a significant impact on business activities. As a countermeasure, the Company constantly obtains the latest information and strives to establish a system for promptly responding to regulatory changes.

If manufacturing facilities are damaged by natural disasters such as large-scale earthquakes or major typhoons, or if employees are unable to come to work due to epidemics, this could result in suspension of plant operations or disruption of transportation operations, affecting business activities, financial position, and operating results. As a countermeasure, the Company has dispersed its production sites into two locations, the Koshigaya Plant (Eastern Japan) and the Hyogo Plant (Western Japan), giving them complementary functions, and has also distributed the servers of its core systems across both sites to reduce risk.

If environmental regulations such as the Air Pollution Control Act and the PRTR Act are tightened beyond expectations, this could restrict corporate activities and increase countermeasure costs, affecting the Group's financial position and operating results. The Group is working on developing environmentally friendly products and reducing CO2 emissions, but depending on the pace of regulatory tightening, there is a risk that response costs will increase. Detailed countermeasures are described in the section on sustainability approach and initiatives.

If accidents such as fires, explosions, or leaks occur, or if industrial accidents involving the suspension of production lines occur, this could affect business activities, financial position, and operating results. Serious accidents in transportation operations could also lead to loss of customer trust, administrative sanctions, and claims for damages. As a countermeasure, the Company conducts maintenance and inspection of manufacturing facilities, planned inspections and repairs, regular on-site patrols and safety education by the Safety and Environment Office, and has equipped all vehicles with digital tachographs and drive recorders.

If unforeseen circumstances lead to a serious quality problem resulting in product liability, this could affect business activities, financial position, and operating results. Quality defects in chemical products have a significant impact on customers and carry risks of loss of trust and claims for damages. As a countermeasure, the Company is working to establish highly reliable production control and an advanced quality control system.

If bad debt losses occur due to the bankruptcy of a business partner, this could affect the Group's financial position and operating results. As a countermeasure, the Company sets credit limits based on the creditworthiness of business partners and has introduced a credit management support system, while also striving to gather credit information through ordinary sales activities.