S.T.CORPORATION

Competition with competitors and new entrants in the daily necessities industry is intensifying, and failure to respond appropriately could adversely affect business performance and financial condition. The Company responds by offering high-value-added products based on analysis of market and consumer needs, reviewing its product lineup, and developing in-store promotions linked with web and TV commercials, while continuing to review its business portfolio and consider capital policy on an ongoing basis.

The Company may implement strategic alliances or corporate acquisitions as part of its business strategy, but if unexpected obstacles or changes in circumstances arise afterward, this could adversely affect business performance and financial condition. As countermeasures, the Company conducts prior due diligence, including analysis of companies and information, to reduce risk after investment, and has established internal working groups to create business synergies.

If unforeseen events such as terrorism, civil unrest, natural disasters, infectious diseases, or human rights issues occur at overseas production sites, primarily in Thailand and Taiwan, business activities could be constrained, adversely affecting business performance and financial condition. The Company gathers information from various sources on the political and economic situation and regulatory trends in each country and region, and strives to strengthen its ability to respond to changes in the environment.

Plastic resin products and steel products, which are key materials for the Company's products, are susceptible to crude oil price surges and yen depreciation, and prolonged high material prices could adversely affect business performance and financial condition. In addition to stabilizing procurement prices through multiple and global sourcing, considering alternative materials, passing on costs to sales prices, and utilizing foreign exchange forward contracts, the Company has begun participating in a daily necessities supply chain council and reorganizing the supply chain within the group.

There is a risk that sales of weather-sensitive items such as mothballs/insect repellents, dehumidifiers, and body warmers may fall below expectations due to unusual weather. The Company works to reduce this risk through analysis and forecasting using historical climate data, and for body warmers, is promoting new value propositions by developing products that leverage heating technology and are less susceptible to weather conditions.

If the Company fails to adequately respond to and disseminate changes in laws, regulations, and ethical standards internally, this could adversely affect business performance and financial condition. The Company has established ethical standards and a human rights policy, and conducts awareness dissemination, education, and surveys across group companies through its Human Rights Compliance Committee, while also holding an annual Partners Meeting and expanding its compliance framework for relevant laws such as the Act on Promotion of Subcontracting Small and Medium-sized Enterprises' Transactions.

If product accidents occur due to design or quality defects or consumer misuse, this could adversely affect business performance and financial condition. The Company has established a quality confirmation system spanning development, design, materials receiving, and manufacturing stages through compliance with relevant laws and the establishment of quality policies and quality control standards, and utilizes feedback from its customer service center to improve product development and services after launch.

If unforeseen incidents such as leakage of confidential information or personal data occur, this could adversely affect business performance and financial condition, and the security risks associated with the active use of generative AI have also been recognized as a new challenge. The Company addresses this through the establishment of information handling standards and a basic personal information protection policy, thorough internal education, and the establishment and implementation of IT security regulations based on advice from external experts, and intends to address security thoroughly without omission when utilizing generative AI.

If a major earthquake, large-scale natural disaster, fire, accident, or similar event occurs, in addition to human and physical damage, this could significantly affect product supply and require substantial costs for facility restoration, adversely affecting business performance and financial condition. The Company has formulated business continuity plans including a BCP for a major earthquake directly beneath the Tokyo metropolitan area, an infectious disease BCP, and a cyberattack BCP, and works to minimize the impact on manufacturing through diversification of production sites, while continuously reviewing its BCP framework from a

While no significant litigation has been filed at this time that would have a material impact, if significant litigation arises in the future and an unfavorable ruling is made against the Company Group, this could restrict business activities and adversely affect business performance and financial condition. The Company strives to prevent litigation in advance through compliance with various laws and regulations related to its products and business, contract execution, and intellectual property investigations, and has established a system to consult with external organizations such as attorneys in the event that an issue arises.