FUJI LATEX CO., LTD.

The Group develops a diverse and wide range of products, and the related intellectual property rights are complex and multifaceted. Although no infringement lawsuits have been filed by third parties at present, there is a possibility that lawsuits seeking sales injunctions may be filed, and the Group may not be able to completely prevent third parties from manufacturing similar products. Failure to protect intellectual property rights or unjust infringement could have a significant impact on business operations and business performance.

The Group has a relatively high interest-bearing debt ratio, resulting in a financial structure that is susceptible to the effects of rising interest rates. Although the Group is considering measures to avoid this risk, such as fixing interest rates or using interest rate swap transactions, a future rise in interest rates could impact its business results and other aspects.

Some of the Group's loan agreements with financial institutions contain financial covenants, and if these covenants are breached, the Group could lose the benefit of the grace period, which could impact its financial condition and other aspects. This risk is directly linked to the stability of fundraising, and maintaining financial discipline is an important issue.

Key raw materials such as silicone oil, resin, and natural rubber are all under strong upward price pressure, and price increases driven by commodity market conditions could affect product costs. The Group aims to absorb costs through corporate efforts such as passing on prices to products and rationalization, but there are concerns about the impact on business performance and financial condition.

The Group's procurement depends on suppliers' supply capacity, and supply shortages during periods of excess demand, price surges, and supply chain damage caused by natural disasters, among other factors, could affect production activities. The Group strives to secure multiple suppliers and build close relationships with them, but if issues such as supply shortages occur, it could impact business performance.

The Group's production facilities are concentrated in Tochigi Prefecture, and if an earthquake, power outage, or other disaster occurs, the development and production facilities could suffer significant damage, impacting business performance. Some factories are aging, and significant damage from disasters such as earthquakes is also anticipated.

In overseas business operations, there are risks specific to geopolitical factors arising from changes in political, economic, legal, and social conditions, exchange rate fluctuations, and the hiring, retention, and management of local personnel. Failure to adequately address these risks could have a significant impact on business operations and business performance.

The Group's medical products, among others, are subject to regulation under the Pharmaceuticals and Medical Devices Act, and manufacturing and sales require approval from the Minister of Health, Labour and Welfare and permission from prefectural governors. If such approvals or licenses are not obtained or are revoked, it could have a significant impact on business operations and business performance.

Although the Group makes every effort to ensure thorough quality control, if a serious quality issue arises that exceeds current technological and management standards, it could lead to product recalls or liability for damages, among other consequences. Such an event could have a significant impact on business performance.

The Group has implemented security measures such as cloud migration, enhanced firewalls, and internal employee education, but if an unexpected computer virus outbreak or unauthorized access occurs, depending on its scale, it could have a significant impact on business performance. Continuous response to the risk of leakage of management information assets and network equipment, among other things, is required.