TOYO TANSO CO., LTD.

Major production facilities are concentrated in Kagawa Prefecture, and if a large-scale disaster such as an earthquake or flood/storm damage exceeding assumptions occurs, operational suspension could have a material impact on the financial position and results of operations. Although measures such as BCP formulation, development of an all-hazard BCP, ensuring seismic resistance and safety, backup systems for information systems, and maintaining supply through inventory have been implemented, the risk of geographic concentration of production sites remains.

The ratio of overseas sales to consolidated net sales reached 57.2% in the fiscal year under review, and is expected to rise further as global expansion progresses going forward. Fluctuations in foreign exchange rates, changes in political conditions and laws and regulations, and in particular changes in politics and policy in China, may affect the results of operations and financial condition, and the expansion of business in China is further heightening this risk.

Increases in raw material and fuel prices directly push up manufacturing costs and may affect the results of operations. While measures such as maintaining a dual-supplier procurement system and passing on costs to selling prices have been implemented, if price increases occur that exceed expectations, these measures may not function sufficiently.

Because manufacturing isotropic graphite materials takes approximately five months, production is carried out based on forecasts, and the inventory turnover period for the fiscal year under review was a lengthy 7.8 months. Although demand forecasting is conducted monthly to control excess inventory, if a decline in demand occurs that exceeds expectations, temporary excess inventory may arise, potentially affecting the financial position.

Special Graphite Products (Electronics) and Composite Materials and Other Products are highly dependent on the electronics field (such as for silicon semiconductor and compound semiconductor manufacturing), and market fluctuations in this field directly affect the results of operations. While efforts are being made to diversify risk by securing share in General Carbon Products (Mechanical Carbon) and Electrical Carbon products and developing new applications such as metallurgical uses, if the electronics industry performs contrary to expectations and remains sluggish, an impact on business performance is unavoidable.

In the carbon products industry, technological and price competition continues on an ongoing basis, and depending on the actions of competitors, there is a risk that the company's market share and profitability could decline. Although efforts are being made to strengthen cost competitiveness through early development of high-value-added products and cost/expense reductions, changes in the competitive environment may affect the results of operations.

Carbon products are subject to export-related laws and regulations such as the Foreign Exchange and Foreign Trade Act, as well as IAEA export controls on nuclear-related equipment, and are also subject to licensing systems, tariffs, taxes, environmental regulations, and other rules in each country. Although the company strives to comply with laws and regulations, it may be subject to guidance from regulatory authorities, and if new legal regulations that cannot currently be anticipated are established in the future, the results of operations may be affected.

The company holds confidential business information, customer information, and personal information, and is exposed to the risk of system failures and information leaks due to virus infections or cyberattacks. Although measures such as establishing a CSIRT structure and strengthening information management have been implemented, if an attack exceeding expectations results in the destruction, falsification, leakage, or system shutdown of important data, this could have a material impact on the results of operations and corporate trust.

In addition to routine capital expenditure for equipment renewal and research and development investment, the company has adopted a policy of actively promoting strategic investments, and expanding the scale of investment may increase the financial burden. If a sudden change in the market environment occurs or the investment recovery period becomes prolonged, there is a risk that the expected returns will not be achieved, affecting the results of operations.