SAKURA RUBBER CO., LTD.

As petrochemical products and metal materials are used as principal raw materials, in a phase of sharp increases in crude oil prices and metal material prices, there are limits to passing on costs to selling prices, and rising costs and increased payment amounts may affect business results and financial position. In addition, changes in the global supply-demand balance and shifts in social conditions have already led to difficulty in obtaining certain raw materials, manifesting as production suspensions and extended procurement lead times, and there is also a risk of delay or temporary suspension of production activities. As countermeasures, the Group is working to reduce costs through lot purchasing and appropriate inventory management.

Although a thorough quality assurance system has been established based on domestic and overseas quality standards, if a serious quality defect or quality incident occurs, it may lead to additional costs and a decline in transaction volume due to deterioration of product evaluation, thereby affecting business results and financial position. Since product reliability is directly linked to the business foundation, continuous maintenance and strengthening of the quality control system is required.

Although risk management regulations and disaster prevention plans have been established and measures implemented, in the event of a large-scale disaster, in addition to the direct impacts such as physical and mental damage to employees and damage to or closure of business sites and production facilities, business continuity may become difficult due to indirect impacts such as a significant decrease in order volume, difficulty in procuring raw materials, and reduced logistics functions. Restrictions on economic activity due to the spread of unknown infectious diseases are also recognized as a risk that could affect business results and financial position through delays or interruptions in transactions.

The Group holds confidential information related to its own technology, sales, and business, as well as confidential information of business partners, and thoroughly manages information based on the latest security environment and information security policies. However, if an information leak occurs due to cyberattacks or other causes, it may lead to interruption or suspension of transactions and damage to tangible and intangible assets.

Securing capable personnel in each department, including engineers in the research and development division and skilled technicians in the manufacturing division, is essential for business activities and sustainable growth, and the Group strives for regular recruitment and development. If it becomes difficult to secure human resources due to intensifying competition for talent among companies, this may affect business activities.

While the Group strives to acquire and protect intellectual property rights related to its business activities, if issues such as litigation or claims arise concerning such intellectual property rights, this may affect business activities. Both the risk of infringement of intellectual property rights and the risk of claims asserted by third parties are anticipated.

The Group is exposed to foreign exchange risk related to foreign currency-denominated import transactions and interest rate fluctuation risk related to fund procurement, and reduces fluctuation risk within a certain range through the use of foreign exchange forward contracts and fixing of interest rates or interest rate swaps. If market conditions fluctuate beyond short-, medium-, and long-term forecasts, this may affect business results and financial position through increases in foreign exchange settlement amounts and interest payment amounts.

The Group utilizes many fixed assets in its business, including factories and leased real estate, and evaluates these fixed assets under management from a medium- to long-term perspective. If the business environment deteriorates significantly in the future, an impairment loss may occur, which may affect business results and financial position.

The Group mainly adopts a defined benefit corporate pension plan, and calculates retirement benefit obligations and expenses through actuarial calculations based on reasonably estimated actuarial assumptions. If there is a sharp deterioration in the investment performance of pension assets or a change in employees' working conditions, this may affect business results and financial position through an increase in retirement benefit expenses, among other factors.