Yodogawa Steel Works,Ltd.

The main raw material, hot-rolled steel sheet, is affected by fluctuations in iron ore and coking coal prices as well as speculative market movements, with geopolitical risks such as the situation in the Middle East, Russia's invasion of Ukraine, and China's economic slowdown destabilizing the supply-demand balance. If selling prices and raw material market conditions diverge beyond expectations, this could affect business performance from FY2027 (ending March 2027) onward. As countermeasures, the Group is building capital relationships with important suppliers, conducting agile negotiations with multiple suppliers, and diversifying its supplier base.

There is a risk of complaints arising from manufactured and sold products and services. In particular, some color-coated steel sheets for building exteriors manufactured between 2007 and 2016 have experienced defects in appearance and durability, and there is a risk of future repair costs arising. The Group has established a quality assurance system based on ISO quality management systems and a dedicated customer response department to ensure prompt handling, and has also taken out liability insurance for some products.

With production and sales bases in Taiwan, China, and Thailand, and overseas sales accounting for a substantial proportion of consolidated net sales, risks exist that could constrain business activities, including the tariff policy of the Trump administration in the United States, the Taiwan issue arising from China's strengthening authoritarian stance, and protectionist trade measures. These risks may not only constrain export sales but also affect the overall global supply-demand environment. The Group addresses this through risk diversification across multiple bases, agile coordination among each base, and ongoing consideration of countermeasures in anticipation of a Taiwan contingency.

Since transactions of overseas consolidated subsidiaries are mostly denominated in local currency or US dollars, fluctuations in the exchange rate against the yen directly affect consolidated net sales and profit. The USD/JPY rate also affects the export environment, price competition with competing imported products, and raw material procurement costs; during the consolidated fiscal year under review, both yen appreciation and depreciation phases occurred. The Group pays close attention to exchange rate trends and implements agile procurement and sales measures to stabilize earnings.

Leakage of confidential information (trade secrets and personal information) due to cyberattacks and similar incidents could cause a significant decline in social credibility and disruption of business activities. Unexpected system failures, such as those caused by ransomware or large-scale power outages from natural disasters, could directly impact production, sales, and indirect operations overall. The Group has established various regulations concerning information systems and information security, built an appropriate system management framework, and is promoting backup measures utilizing cloud services.

The introduction of carbon pricing (carbon taxes, CO2 emissions trading) may raise raw material and energy prices, and stricter environmental regulations may increase capital expenditures (transition risk); intensifying natural disasters could damage business sites and disrupt supply chains (physical risk), potentially having a significant medium- to long-term impact on business, performance, and financial condition. The Group supports the TCFD recommendations and has set targets of reducing CO2 emissions by 46% by fiscal 2030 compared to fiscal 2013 and achieving carbon neutrality by 2050, addressing this through ISO14001 certification and the Yodoko Environmental Management System.

The Surface-Treated Steel Sheet Business and the Steel Sheet Building Materials Business are heavily influenced by fluctuations in global steel and steel sheet building materials market conditions. If both raw material prices and selling prices diverge beyond expectations, this could have a significant impact not only on business performance but also on short-term cash flow. The Group addresses this through agile financial management, including maintaining an appropriate level of cash and deposits, liquidating investment securities, and utilizing commitment line agreements with financial institutions.

The Group applies impairment accounting to tangible and intangible fixed assets, and if impairment treatment becomes necessary due to future changes in the business environment, this could affect its financial position and business results. At the end of the consolidated fiscal year under review (end of FY2026, ending March 2026), an impairment loss of ¥205 million was recorded as an extraordinary loss for assets held by the subsidiary Fukui Yodoko Co., Ltd. for which there was no prospect of operation.

The Group holds shares strategically due to their importance to business strategy and relationships with business partners. If share prices decline significantly due to changes in economic conditions, an impairment is recorded when fair value falls 50% or more below book value, and a valuation loss is recorded as an extraordinary loss (after assessing the possibility of recovery) when it falls between 30% and 50% below book value, potentially affecting business performance and financial condition. Every year, the Group verifies the appropriateness and rationality of holding purposes for individual stocks, and proceeds with reclassification to pure investment or divestiture for those found lacking rationality.

If significant actuarial differences arise due to changes in the assumptions used in calculations, such as the discount rate and expected long-term rate of return on plan assets, or due to deterioration in the pension asset investment environment, the amount of liability to be expensed may increase due to an increase in unfunded retirement benefit obligations, potentially affecting business performance. Every year, the Group reviews its pension investment plans and adjusts the composition ratio of pension assets, working to mitigate the impact by managing investments in line with economic conditions.