Godo Steel,Ltd.

Under Japan's mature economy, significant growth in domestic public works and private construction demand is unlikely, and as demand declines, intensified sales competition with other companies may affect business performance. As countermeasures, the Group implements production in line with demand, strives to maintain sales prices that allow for reproduction (sustainable pricing), and focuses on exporting billets and steel products to strengthen its revenue base.

The price of steel scrap, the main raw material, carries the risk of sharp short-term fluctuations due to factors such as geopolitical risks, expanding demand within the East Asia region, and increased purchasing by domestic blast furnace manufacturers. A sharp rise in prices directly increases manufacturing costs and adversely affects business performance; the Group addresses this by maintaining optimal inventory levels according to operating conditions.

If oversupply issues become apparent due to expanded steel production capacity worldwide, particularly in East Asia, exports from overseas markets to the Japanese market may increase, potentially causing a decline in sales volume and sales prices of the Group's products. As a countermeasure, the Group has built a business structure with multiple manufacturing sites, promoting operational efficiency across the Group, strengthening sales capabilities, and effectively utilizing assets.

If a decline in profitability due to changes in the business environment or other factors makes it impossible to expect recovery of invested amounts, the Group may need to reduce the book value of fixed assets and record impairment losses, which could affect business performance. The Group addresses this by strengthening its revenue base through production in line with demand, maintaining sales prices that allow for reproduction, and focusing on exports of billets and steel products.

As the Group holds interest-bearing debt, changes in interest rate conditions and other financial market fluctuations may increase interest payment burdens and affect business performance. As a countermeasure, the Group works to reduce this risk through means such as fixing interest rates.

Electricity rates are on an upward trend against the backdrop of continued reliance on thermal power generation due to the ongoing suspension of nuclear power plant operations, rising LNG and coal prices, and increased fuel import costs accompanying yen depreciation, which has a significant impact on the manufacturing costs of the Group, which mainly operates electric furnaces. The Group addresses this by actively investing in energy-saving measures and power-saving initiatives such as the introduction of solar power generation equipment.

Electrodes, a key material in electric furnace manufacturing, carry the risk of sharp short-term price fluctuations due to tight supply-demand conditions for needle coke, driven by the expansion of electric furnaces in East Asia and the spread of electric vehicles. In addition, some refractories and ferroalloys have limited countries of origin for raw materials, and constraints on procurement volumes or price increases may affect business performance; the Group addresses this by securing multiple material suppliers and maintaining appropriate inventory levels.

Future changes, strengthening, or new introduction of laws, regulations, and policies, including environmental regulations, may constrain business activities, particularly in the Steel Business, and affect business performance. The Group strives to take proactive measures by accurately gathering necessary information through participation in industry associations and sharing information with Group companies through the Group Risk Management Committee.

Amid worsening labor shortages due to the declining birthrate and shrinking working population, securing and developing capable personnel is essential to the Group's growth, and failure to achieve personnel balance plans may affect business performance. The Group is working on hiring diverse talent including women, foreign nationals, and mid-career hires, promoting D&I, supporting work-life balance for childcare and caregiving, and investing in labor-saving equipment.

The Group's business activities are highly dependent on information systems, and if cyber attacks such as virus infections by malicious third parties cause system outages, external leakage, damage, or falsification of confidential information, this could lead to suspension of production and operations, loss of competitive advantage in intellectual property, litigation, and decline in social credibility. The Group positions the prevention of leakage of confidential information, including technical information, as a top-priority management issue, and promotes measures such as strengthening system security as well as business rules and employee training.