Nihon Yamamura Glass Co., Ltd.

The domestic glass bottle industry's annual shipment volume decreased to 93.1% year on year, and demand is expected to continue declining due to population decline from the falling birthrate and aging society, as well as the shift to alternative container materials. The Group formulates its business plans on the premise that this trend will continue; however, if the decline progresses at a pace exceeding expectations, sales volume may fluctuate and affect business performance.

Due to heightened tensions in the Middle East and exchange rate fluctuations, the purchase prices of natural gas, the fuel used for glass melting, and naphtha, the main raw material for plastic caps, may fluctuate significantly. In addition, crude oil price trends also affect fuel costs in the logistics business and prices of packaging materials and auxiliary raw materials, and there is a risk that performance forecasts could fluctuate significantly if price changes exceed expectations. The business plan sets prices based on various information, but complete avoidance of this risk is difficult.

In overseas businesses in Southeast Asia, China, Taiwan, the United States, and other regions, investment gains/losses, equity valuation amounts, and commercial transactions are affected by exchange rate fluctuations. Although hedges such as forward exchange contracts are used for some transactions, complete avoidance is difficult, and sharp exchange rate fluctuations may affect business performance. In addition, changes in the political situation and various regulations, and the enactment of new laws in the countries of investees and business partners, also pose risks that may affect business performance.

The New Glass Business, which serves the electronics, energy, automotive, and optical communications industries, operates in an environment where the pace of technological innovation is rapid and there is constant demand for price reductions. Sales volume may fluctuate significantly due to trends in market and customer product shipments and price reductions, and given the presence of vigorous competition from both existing competitors and new entrants, there is a risk that customers may switch to other suppliers. In addition, changes in the international supply-demand environment for rare earths may affect the procurement of raw materials.

If IT systems are unable to operate stably for an extended period due to cyberattacks or disasters, business operations may be significantly disrupted, potentially having an adverse effect on business performance. In addition, if personal information or confidential corporate information is leaked externally, there is a risk that loss of social trust or claims for damages could adversely affect business performance. Although measures such as formulating a basic information security policy, establishing an information security committee, and conducting training have been implemented, damage from unknown cyberattacks may exceed what can be anticipated.

Depending on the application of the domestic emissions trading scheme to be fully introduced from FY2026 (ending March 2026) and trends in carbon taxes, costs related to reducing emissions—including procurement of renewable energy, equipment installation, and technology development—as well as costs of responding to the system, may increase and affect business performance. The Company has set SBTi-certified greenhouse gas reduction targets and is taking measures such as maintaining ISO14001 certification and obtaining a B rank in the CDP Climate Change questionnaire; however, given the business characteristic of consuming large amounts of fossil fuels, the risk of increased costs is expected to continue.

The Group procures working capital and investment funds through borrowings from financial institutions, and if the business environment deteriorates, there is a possibility that fundraising may become constrained or procurement costs may increase. Some borrowings are subject to financial covenants, and if either the consolidated or non-consolidated financial results violate these covenants, there is a risk of losing the benefit of the grace period on repayment. Future interest rate trends may also affect business performance.

Approximately 70% of the Logistics Business's net sales come from transactions with a small number of major customers, and losing a contract with a major customer could significantly affect net sales. In addition, there is a risk that rising labor costs, including increased recruitment expenses due to labor shortages, could put pressure on profits.

If an unforeseen event such as a large-scale earthquake or wind/flood disaster directly strikes manufacturing or sales sites, in addition to direct damage, disruption to the supply chain could halt production activities and result in substantial losses. If an infectious disease similar to COVID-19 were to spread globally again, there is a risk that effects on the supply chain and employees could hinder business continuity. Although efforts are being made to establish a system for early recovery, there are limits to the ability to respond to disasters that exceed expectations.

For held assets such as inventories, fixed assets, and securities, a significant decline in market value or decrease in profitability may result in impairment losses or valuation losses being recorded, which could affect business performance. In addition, deferred tax assets are subject to reduction if there are changes in estimates of future taxable income or changes in tax rates due to tax reform, which poses a risk to business performance. Furthermore, if actual bad debt losses diverge from the estimated amounts used when recording allowances, this may also affect business performance.