MORY INDUSTRIES INC.

The main materials for stainless steel pipes and stainless steel bars are procured from multiple suppliers both domestically and overseas, but the Group's dependence on a single overseas manufacturer, which has advantages in quality, delivery time, and price, has become high. If an unforeseen accident occurs at this manufacturer, there is a risk that stable supply could be disrupted. As a countermeasure, the Group strives to avoid supply shortages by continuing transactions with as many suppliers as possible.

Stainless steel, the material used in the Group's core products, currently has no substitute in terms of performance and price, but if technological innovation leads to the development of new materials, or if users develop new products that do not require stainless steel pipes, there is a risk that demand could be lost. The Group strives to gather information and aims to establish a system capable of responding to the development of new materials and the obsolescence of existing products.

Stainless steel, the material used in the Group's core products, contains nickel, a rare metal, and there is a risk that material prices could fluctuate significantly due to changes in nickel prices, exchange rate fluctuations, and speculative factors. In addition, due to the high dependence on imported materials, the Group is also affected by exchange rate fluctuation risk. When prices rise, the Group seeks to pass on the increase to product prices after providing sufficient explanation to business partners, but the challenge is that these are external factors beyond its control.

Cheap products from overseas are being imported in the core products of pipes and bars, putting pressure on price competitiveness. The Group counters these imported products by differentiating itself through the quality standards and after-sales service it offers as a domestic manufacturer.

If the Kawachinagano Plant, the Group's main plant, becomes unable to operate due to an earthquake or other natural disaster, alternative production would be carried out at group companies such as Kanto Mori Kogyo, but complete compensation would be difficult in terms of scale and equipment, creating a risk of a significant decline in production volume and product variety. Constructing a new plant of the same scale is not realistic, and the Group recognizes this as a major risk at present. It is establishing a business continuity system through the implementation of seismic reinforcement work and the utilization of casualty insurance.

Since the plant's operational departments require a certain level of experience and skill, it is difficult to immediately compensate for a shortage of personnel caused by disasters or infectious diseases through new hiring. Furthermore, future recruitment difficulties are a concern due to the declining birthrate. As a countermeasure, the Group is promoting diversification of working styles, including the effective utilization of re-employed workers.

Due to the impact of a potential closure of the Strait of Hormuz resulting from a deteriorating situation in the Middle East, naphtha procurement has become unstable, leading to production cuts, supply restrictions, and longer lead times among petrochemical manufacturers both in Japan and overseas. The Group faces risks including price increases, delivery delays, and supply uncertainty for auxiliary materials such as packaging materials, as well as rising transportation costs and reduced service frequency from transport companies. The Group is addressing these risks by continuing transactions with multiple suppliers and by reviewing delivery prioritization and improving loading efficiency.