Maruichi Steel Tube Ltd.

Steel pipe and plated steel sheet products have diverse applications, including materials for low- to medium-rise buildings, transportation equipment such as automobiles, agricultural materials, and materials for public investment. Consolidated business results are affected by trends in construction investment, transportation equipment production volume, corporate capital investment, and public investment. There is a risk that weak demand in specific sectors will directly impact sales and profits.

The market for hot-rolled coil, the main raw material, fluctuates depending on global supply and demand trends for steel raw materials and steel products. While the company strives to secure stable procurement from domestic and overseas blast furnace manufacturers and to establish an appropriate sales price structure, if it is unable to sufficiently pass on rising raw material costs to sales prices, this could adversely affect consolidated business results.

Securities and investment securities account for approximately 20% of total assets, consisting mainly of shares in affiliated companies, shares in major business partners, and bonds. The company's policy is to recognize impairment losses when the market value falls 30% or more below the acquisition cost. If the market value of held securities fluctuates significantly due to a downturn in the stock market or other factors, this could have a material impact on consolidated business results.

If the profitability of held fixed assets declines and investment recovery becomes unlikely, an impairment loss may occur, which could affect consolidated business results. For the company, which holds large-scale facilities as a manufacturer, weak demand or deterioration in the business environment could trigger impairment.

The Group, which operates globally, is exposed to risks such as conflicts, terrorism, demonstrations, strikes, political instability, and currency crises in the countries and regions where it conducts business activities. If such events occur, significant disruption to local production and sales activities could result, potentially having a material impact on consolidated business results.

The company is working to reduce environmental impact through measures such as installing solar power generation equipment and adopting environmentally friendly paints. However, if new environmental regulations mandating CO2 emission reductions are introduced, business activities may be constrained, and substantial costs may be incurred for equipment upgrades to comply with regulations, potentially affecting consolidated business results.

While the company conducts global business in compliance with the laws and regulations of each country, if tariff increases or tightened import/export regulations occur due to trade friction, there is a risk that business activities will be disrupted, affecting consolidated business results. This risk is particularly likely to materialize in international transactions involving steel pipe products.

The company seeks to reduce risk by dispersing production sites through a demand-area production system. However, if plant operations are disrupted by large-scale disasters such as earthquakes or storm and flood damage, or by a pandemic, this could affect consolidated business results. Although employee education is thoroughly conducted through the Safety Education Department, there are limits to complete preparedness for large-scale events.

In response to the declining domestic labor force population, the company is promoting measures such as hiring more women, overseas training, re-employment systems, and labor-saving through equipment upgrades. However, if these measures do not proceed as planned and the company is unable to secure excellent human resources or achieve technology succession, this could pose a risk to the Group's continued development.

The company has formulated an information security policy and is working on information management. However, if unforeseen circumstances lead to the leakage of confidential information of customers and business partners, employees' personal information, or trade secrets, this could damage the company's social reputation and adversely affect its business performance. Against the backdrop of increasingly sophisticated cyberattacks, information security risk is also rising in the manufacturing industry.