JCU CORPORATION

Surface treatment chemicals and equipment, which account for the majority of sales, are directed toward the automotive industry and the printed circuit board industry, and thus trends in automobile production volume, functional changes brought about by the shift to EVs, and fluctuations in production volume in the electronic device market such as smartphones and personal computers directly affect business performance. In addition, capital investment trends in both industries greatly influence order activity for equipment, so a deterioration in the business conditions of these target industries would spread to both sales and profit. The Company recognizes the risk of dependence on specific industries, but there is no description of specific diversification measures.

The Company conducts business in East and Southeast Asia and North America, and is exposed both to foreign exchange fluctuation risk arising from settlements denominated in foreign currencies and to translation difference risk when converting the financial statements of overseas consolidated subsidiaries into yen. The Company seeks to minimize short-term effects through forward exchange contracts and other measures, but if fluctuations occur that exceed expectations, business performance will be affected. In particular, sharp yen depreciation or appreciation directly affects the yen-converted amounts of sales and profit.

In production and sales activities in East and Southeast Asia and North America, there are latent force majeure risks such as unexpected changes in laws and regulations, deterioration of political and economic conditions, terrorism and war, natural disasters, and infectious diseases. Should any of these risks materialize, business activities in the respective regions could be disrupted, potentially affecting the performance of the group as a whole. The Company strives for early risk detection through information exchange with overseas subsidiaries, but complete elimination of force majeure factors is difficult.

The Company uses a wide variety of chemicals as raw materials for surface treatment chemicals, and is subject to regulation under laws and regulations concerning chemical substances both in Japan and overseas. If the Company is slow to respond to legal amendments and measures are taken to prohibit or restrict the use of chemicals used as raw materials, disruptions to product supply could occur until alternative products are developed, affecting business performance. The Company strives to comply with laws and regulations under its Compliance Committee and monitors regulatory trends closely, but depending on the speed of regulatory tightening, there is a risk that its response could lag behind.

If confidential information such as the composition of chemicals, the development history of equipment, and technical data shared with customers were to leak externally, other companies could manufacture similar products, undermining the Company's competitive advantage. There is also a risk of information leakage, including breaches of confidentiality agreements by former employees, which raises concerns about the impact on business performance. The Company has implemented measures such as prohibiting the removal and copying of information outside the Company, but it is difficult to completely eliminate insider risk.

In the Chemicals Business, surface treatment methods may change in response to technological innovation and shifting needs, and competitors are also constantly developing new products. If the Company falls behind in developing new technologies or responding to changes in surface treatment methods, it risks losing the development race and losing market share. In addition, if counterfeit products imitating the Company's intellectual property appear on the market, the Company could become embroiled in price competition, potentially reducing its competitiveness.

Major products in the Chemicals Business use a wide range of raw materials, including chemicals and precious metals, and there is a risk that significant fluctuations in market conditions could raise raw material prices and push up manufacturing costs. If it is difficult to reduce manufacturing costs or pass on price increases to product prices, business performance will be affected through a decline in profit margins. The Company takes measures to minimize the impact of market fluctuations, but there are limits to its ability to respond to sharp price increases.

If all personal computers on the network were to stop functioning due to infection by an unknown computer virus, internal operations would come to a complete halt, and there is a risk that important data on servers could be lost. If a virus infection were to spread to customers or others, claims for damages could arise, potentially having a material impact on business performance and the Company's reputation. Disclosure regarding the specific details of cybersecurity measures is limited in the Annual Securities Report.

Securing and developing global talent is essential for sustained global growth, and the Company is strengthening recruitment activities and expanding education and training. However, if the Company is unable to secure and develop excellent talent as planned, or if personnel with technical skills and language abilities leave the Company, business performance will be affected through a decline in business competitiveness. In particular, as overseas business expands, the risk of a shortage of global talent tends to increase.

Under the medium-term management plan "JCU VISION 2035 -1st stage-" (FY2025 (ending March 2025) to FY2027 (ending March 2027)), the Company is investing substantial management resources under six basic policies, including proactive investment in growth areas, promotion of DX, and promotion of sustainability management. If these initiatives are not successful or fail to achieve the expected effects, it may become difficult to recoup investments, potentially affecting business performance. Responding to rapidly growing markets and an uncertain business environment will be key to the successful execution of the strategy.