YOTAI REFRACTORIES CO.,LTD.

Refractories are essential basic materials for high-heat industries such as steel, chemicals, cement, and glass, but a deterioration in economic conditions could reduce customer demand for refractories, potentially affecting business performance and financial condition. As the structure is susceptible to the effects of booms and downturns in specific industries, the Company is expanding into multiple industries and responding through a product development and sales system that integrates sales, R&D, manufacturing, and technical services.

Raw material prices may fluctuate significantly due to economic conditions in producing regions, exchange rate movements, geopolitical risks, and other factors, potentially affecting business performance and financial condition. As procurement is centered on China, the Company is particularly susceptible to the effects of China's political and economic trends and exchange rate fluctuations. As a countermeasure, the Company secures diverse procurement routes to diversify risk.

Competition in the refractories industry is extremely severe and is expected to intensify further going forward; if competitors are able to offer similar products at lower prices, this could affect business performance and financial condition. To maintain competitiveness as a specialized manufacturer, the Company is promoting reductions in procurement costs and improvements in production efficiency through the introduction of rationalized equipment, while also providing sincere and agile customer response.

In June 2023, the Company established a wholly owned subsidiary in Yingkou, China (Yingkou Yaojin Import & Export Co., Ltd.); since local legal regulations and business practices differ significantly from those in Japan, unforeseen events could affect business performance and financial condition. The Company has established an information-gathering system in cooperation with its local subsidiary and is working to build a framework that can respond appropriately in the event of an emergency.

If any of the Company's four manufacturing sites—two plants in Okayama Prefecture, one plant in Osaka Prefecture, and one plant in Gifu Prefecture—are damaged by earthquakes, typhoons, or other natural disasters, production could be halted, potentially having a significant impact on business performance and financial condition. Because manufacturing sites are concentrated in specific regions, the risk in the event of a wide-area disaster is high. The Company works to minimize damage by identifying risks in cooperation with local governments and promoting its BCP (Business Continuity Plan).

If infectious diseases such as COVID-19 spread globally and become prolonged, concerns over raw material supply and a decline in refractory demand due to stagnating economic activity could arise, potentially affecting business performance and financial condition. As countermeasures, the Company aims to maintain production by optimizing raw material inventory levels and implementing infection prevention measures, while striving to minimize damage through diligent information gathering.