Chubu Steel Plate Co.,Ltd.

The domestic steel plate market is significantly affected by the production trends and pricing policies of integrated steel producers, and competition with major domestic electric furnace manufacturers as well as demand decline and supply increase due to domestic and overseas economic downturns intensify price competition. A decline in the product market directly affects the sales and profits of the Group. While no specific countermeasures are described, continuous monitoring of market trends is a premise.

The main raw material for steel plate, the Company's core product, is steel scrap, and its purchase price fluctuates significantly not only due to domestic supply and demand but also due to international market conditions influenced by global steel production trends. If increases in raw material prices cannot be appropriately passed through to product prices, profitability will be squeezed. In situations where price pass-through is delayed or insufficient, the impact on business results tends to become apparent.

Since steel plate manufacturing consumes large amounts of electricity and energy such as LNG, fluctuations in exchange rates and crude oil prices, as well as government energy policy, that cause energy unit prices to surge push up manufacturing costs. Although cost reduction efforts such as utilizing late-night electricity are being made, it is difficult to fully absorb unit price increases caused by external factors. Rising manufacturing costs directly lead to a decline in profit margins.

The emissions trading scheme is scheduled to become fully operational from FY2026 (ending March 2026), and future tightening of greenhouse gas emission regulations may cause raw material prices, electricity charges, and other operating costs to surge, reducing profitability. The Group is strengthening efforts toward achieving carbon neutrality by FY2050 (ending March 2050) by promoting low emissions through the electric furnace steelmaking method, but an increase in regulatory compliance costs is unavoidable going forward. Depending on the timing and level of introduction or tightening of regulations, the impact on business results could be significant.

The steel business is a capital-intensive industry requiring continuous, substantial capital expenditure and equipment repair spending, and the Group is currently engaged in numerous capital investment and equipment renovation projects. If the investment effect falls below initial expectations or the planned production volume cannot be secured during construction, business results will be adversely affected. The larger the scale of investment, the correspondingly greater the financial impact if the plan is not achieved.

Most of the Group's business sites, including its main manufacturing plant, are concentrated in and around Nagoya City, Aichi Prefecture, resulting in a high risk of production halts in the event of a large-scale natural disaster, infectious disease outbreak, terrorism, or similar event. This geographic concentration makes it likely that a single event could spread to affect the entire business, and a prolonged shutdown would have a severe impact on business results. The occurrence of major accidents, industrial accidents, environmental problems, and the like also affects business results through the suspension or restriction of business activities.

The steel plate manufacturing process consumes large amounts of energy and materials and generates waste and by-products, making it subject to various laws and public regulations, including environmental regulations. Future tightening of regulations or stricter enforcement of laws may increase business constraints and give rise to new countermeasure costs. Although the Group strives to comply with laws and regulations, the costs of responding to changes in the regulatory environment can affect business results.

In the course of conducting business, the Group holds customer information, personal information, and confidential business and technical information, and is exposed to risks such as unauthorized access and information leakage. Although management systems and safety measures have been implemented, if an information leakage or loss incident occurs, it will affect business results through damage compensation and a decline in social credibility. Due to the increasing sophistication and diversification of cyberattacks, complete defense is difficult.

Due to the declining birthrate, accelerating labor mobility, and changes in the supply-demand balance of the labor market, there is a risk that it will become difficult to secure capable personnel in a planned manner. Although the Group strives to secure and develop personnel based on its basic human resource management policy, if recruitment plans are not achieved, it will affect business activities and business results. The difficulty of securing skilled personnel in the manufacturing industry is also an issue related to maintaining production capacity over the medium to long term.

Steel plate manufacturing consumes large quantities of various materials, some of which are procured from overseas, so if problems arise with suppliers due to geopolitical risk, securing materials may become difficult. Although the Group strives to gather broad information and secure diverse procurement routes, geopolitical risk is an external factor that is difficult to fully control. A slowdown in material procurement directly affects business results through delays or suspensions in production plans.