Soken Chemical & Engineering Co., Ltd.

The Group's Chemicals products are widely used in the bonding of optical films incorporated into liquid crystal displays and other components, resulting in a high degree of dependence on this field. If technological innovation renders optical films unnecessary, or if price competition intensifies due to lower pricing of competing or substitute products, this could have a significant impact on business performance. The Group is working to reduce this dependence through continued development of new products.

The Group's Chemicals products are used in a wide range of fields including electronics/information, automobiles/home appliances/building materials, and daily necessities, and are affected by overall economic conditions and capital investment trends. In particular, demand trends, competitive conditions, and pricing conditions in the liquid crystal display-related field may have a significant impact on business performance. Since customers for Equipment Systems also span a wide range of manufacturers of synthetic resins, paints, inks, and other products, there is a risk that multiple segments could be affected simultaneously during an economic downturn.

The prices of acrylic ester and ethyl acetate, the main raw materials for Chemicals products, are affected by crude oil and naphtha market conditions, creating a risk that it may become difficult to pass on rising raw material costs to selling prices. The Group is working to secure stable procurement and reduce costs by securing multiple procurement sources both domestically and overseas, but there is a possibility that its response may lag behind sudden market fluctuations. If cost pass-through cannot be achieved, profitability could deteriorate significantly.

The Group is actively pursuing business development through four overseas consolidated subsidiaries, focusing on the future potential of the Asian region, particularly the Chinese market. If unforeseen events occur locally, such as changes in laws and regulations, differences in business customs, political and economic turmoil, natural disasters, or infectious diseases, this could affect business performance. The concentration in specific regions creates a structure that is susceptible to geopolitical risks and the effects of regulatory changes.

Since the Group handles various chemical substances, including organic solvents, as raw materials, it is subject to regulations under the Industrial Safety and Health Act, the Poisonous and Deleterious Substances Control Act, the Fire Service Act, and other laws, and regulations related to environmental protection tend to be tightened year by year. If restrictions on chemical substances used or large-scale capital investment become necessary, this could have a significant impact on business performance. The Group is addressing this through efforts to conserve energy and reduce emissions of environmentally hazardous substances, but there is a risk that response costs could increase depending on the pace of regulatory tightening.

Because the Group handles chemical substances and hazardous materials, there is a risk of significant losses due to natural disasters, fires, explosions, and other accidents. If damage occurs to buildings and production facilities, infrastructure such as electricity and gas is affected, or widespread supply chain disruptions occur, this could have a significant impact on production activities. The Group strives for preventive management by conducting inspections and maintenance of manufacturing facilities, investing in safety equipment, and conducting regular disaster prevention drills.

The Group manages important confidential information such as technical information and personal information of customers and other stakeholders through its systems, and there is a risk that a serious failure of information systems due to cyberattacks, unauthorized access, disasters, or other causes could result in business interruption or leakage of confidential data. This could lead to a decline in social credibility and significant response costs, potentially affecting business performance. The Group is implementing countermeasures such as establishing related regulations, thoroughly educating employees, and strengthening security systems.

The Group must continuously develop high-value-added products and technologies that meet market and customer needs, and is actively promoting research and development in both basic and applied research. If the Group fails to respond appropriately to changes in market and customer needs, its competitiveness could decline, potentially affecting business performance. New businesses may also require a long period of time to achieve stable profitability, and there is a risk that results may not be achieved as planned.

Securing personnel who can excel in the global market and personnel capable of creating new businesses is essential to the Group's sustainable growth. The Group has adopted an active recruitment policy in line with business expansion, but if it is unable to sufficiently secure and develop personnel, or if existing personnel leave, this could affect its business and performance. This risk is becoming a mid- to long-term challenge, particularly as competition intensifies for the acquisition of technical personnel with specialized chemical knowledge.

The Group holds various fixed assets such as production facilities and research facilities, and if the market value of these assets declines significantly, or if the profitability of business assets deteriorates with no prospect of recovery, impairment accounting treatment may become necessary. If impairment losses occur, this would directly affect business performance for that period. In particular, given the Group's high degree of dependence on the liquid crystal display-related field, sudden changes in market conditions could be a factor that increases impairment risk.