TAKASAGO TEKKO K.K.,

There is a possibility that raw material prices for Polished Steel Strip and stainless steel may fluctuate significantly, and if such increases cannot be passed on to product prices, this may adversely affect business performance. In addition, raw material procurement is highly dependent on specific manufacturers, and if supply delays or quality issues occur, there is a risk of decreased sales due to reduced production and delayed product delivery. The Group is working on passing on product prices and reducing costs, but depending on progress, there may be an impact on business performance.

Polished Steel Strip, the Group's core product, is mainly used in automotive parts, and order volumes are closely linked to trends in the automotive industry. A sharp fluctuation in automobile production and sales volumes could directly impact the Group's business performance. The Group is promoting sales expansion through market development and product development that meets customer needs, but the risk of concentration in a specific industry remains.

The Group strives to thoroughly maintain production equipment to ensure stable product supply, but if a major equipment failure occurs, it may disrupt plant operations and affect business performance. Difficulty in supplying products in line with order volumes could lead to delivery delays to customers and decreased sales. The Group is working to prevent such incidents through strengthened equipment maintenance.

The Group focuses on securing and developing skilled engineers necessary for operations, but if it is unable to secure the necessary personnel, plant operations may be disrupted, affecting business performance. Technology transfer and labor shortages in the manufacturing industry are challenges facing the entire industry, and the Group is no exception. Continuous efforts to secure and develop skilled engineers are required.

Deferred tax assets are recognized based on reasonable estimates of future taxable income and an assessment of recoverability, but if there are significant changes in the estimate of future taxable income, deferred tax assets may decrease, potentially affecting business performance. If the outlook for taxable income is revised downward due to a deterioration in business performance or other factors, there is a risk of a temporary adverse impact on profit and loss.

Working capital and capital expenditure funds are mainly procured through bank borrowings, and for funds procured at variable interest rates, a sharp fluctuation in market interest rates may affect business performance. For long-term funds, the Group hedges risk using interest rate swaps and other instruments, but risk remains for the variable-rate portion.

The Group thoroughly manages credit for trade receivables, but if a bad debt loss occurs due to a customer's bankruptcy, it may affect business performance. In a downturn in economic conditions, the risk of deterioration in customers' financial condition increases, making continuous strengthening of credit management important.

The Group's main manufacturing and sales bases are concentrated in Tokyo, and if a large-scale disaster exceeding expectations occurs, it may disrupt plant operations and product delivery, and also affect business performance due to an overall slowdown in economic activity. The Group carries out disaster countermeasures such as regular maintenance and seismic reinforcement of production equipment, but the geographic risk from base concentration remains.

If an infectious disease spreads on a nationwide or global scale, plant operations may be suspended and the provision of products and services may be disrupted, and a decrease in order volume in the Steel Products Business is also anticipated. The Group is addressing this through thorough cost reduction and the promotion of market development and product development, but the risk of impact on business operations, financial condition, and results of operations cannot be eliminated.