OSAKA STEEL CO., LTD.

The ordinary steel electric furnace industry has a structural oversupply capacity domestically, and there is a persistent risk of price declines due to overproduction and oversupply. Compounded by the risk of overseas market price declines resulting from changes in the overseas supply-demand balance, particularly among East Asian countries, there is concern about the impact on business performance. The Company is working to minimize this risk by thoroughly managing production in line with demand.

Steel scrap, ferroalloys, and various materials are traded in international markets, and there is a risk of sharp price increases and volatility due to fluctuations in East Asian steel production and expanding demand for recycled resources. There is also an emerging risk that procurement prices, including energy, could surge due to prolonged instability in the Middle East, which could have a significant impact on business performance. The Company is working to reduce this risk by promoting optimal procurement of raw materials in line with production needs.

As an electric furnace manufacturer that uses large amounts of electricity, there is a risk that electricity purchase prices could rise significantly due to resource price fluctuations caused by regional conflicts and changes in the electricity supply-demand environment associated with decarbonization. If electricity supply and demand becomes tight due to the operating status of domestic power plants or weather conditions, production activities may be disrupted due to constraints on electricity supply. The Company is working to reduce this risk by building a production system that pursues resource and energy conservation.

Regarding the consolidated subsidiary KOS, in January 2026 a policy of business suspension and withdrawal from Indonesia was decided, and dissolution was resolved in May 2026; a provision for loss on business withdrawal has already been recorded in the consolidated financial results for FY2026 (ending March 2026). Going forward, if procedural delays or unexpected costs arise in the withdrawal process due to fluctuations in Indonesia's economic conditions, legal regulations, exchange rates, or other factors, additional losses may occur. The Group is working to minimize this risk by appropriately proceeding with the withdrawal procedures.

If electrical or mechanical accidents, fires, explosions, or industrial accidents occur at important equipment such as electric furnaces, continuous casting machines, and rolling mills, this could adversely affect business performance and financial condition due to production and shipment delays from operational disruptions, incurred costs and compensation, and damage to credibility. Given the nature of the steelmaking business, there is a high degree of dependence on certain critical equipment, and the scope of risk impact is broad. The Group is working to reduce this risk through human resource development, skills transfer, daily equipment maintenance, and renewal of aging equipment.

In the steelmaking business, which is a capital-intensive industry, continuous and substantial capital expenditure and equipment repair spending are required. If the renewal of aging equipment does not proceed as planned and fails to fully deliver its intended effects, this could adversely affect business performance and financial condition. While equipment renewals incorporating functional improvements and energy-saving measures are being implemented, the risk of startup issues cannot be eliminated. The Group is working to reduce this risk by establishing project management systems, strengthening operational management systems, and implementing phased operational adjustments.

The effects of climate change may adversely affect business performance, with both physical risks and transition risks anticipated. This also includes the risk that business activities may be constrained or costs may increase due to the introduction of new regulations on fossil fuel usage. Detailed anticipated risks and countermeasures are described in the Company's approach and initiatives regarding sustainability (response to climate change).

If system outages, leakage, damage, or falsification of confidential information occur due to cyberattacks or other causes, this could adversely affect business performance through the suspension of production and operations, litigation, and loss of social credibility. Trade secrets and personal information of the Company, customers, and business partners are stored in information systems, and the scope of risk impact is broad. The Company implements robust operational management, including redundancy of critical systems and networks and relocation of data centers, in addition to conducting information security education and simulated suspicious email drills.

Due to the tightening of labor supply and demand associated with the declining birthrate and aging population, securing and developing capable human resources may become difficult, which could adversely affect business activities, business performance, and financial condition. In the steelmaking business, the transfer of skills and technology is important, and a shortage of human resources poses a risk that directly affects operational quality. The Company is working to enhance and strengthen human capital by expanding and diversifying recruitment channels, improving labor productivity through IT utilization, promoting human resource development initiatives, and improving employee engagement.

If environmental regulations concerning air, water, and soil pollution, chemical substances, and waste disposal in Japan and Indonesia become stricter in the future, this could make it difficult to continue business operations or increase compliance costs. Even after withdrawal from the Indonesia business, the risk of stricter regulations in Japan continues to exist. The Group is working to reduce the environmental impact of the entire Group through detailed environmental risk responses at each business site and regional environmental conservation activities.